According to CNBC, Spotify just reported third-quarter results that beat Wall Street expectations with total revenue climbing 12% year-over-year. The streaming platform hit 281 million premium subscribers, growing 12% but just missing analyst estimates of 281.24 million. Premium subscription prices increased in August from 10.99 to 11.99 euros across multiple markets including Europe, Asia-Pacific, and Latin America. However, ad-supported revenue dropped 6% to 446 million euros, well below the expected 467.7 million. The company issued weak guidance for both revenue and subscribers in the current quarter, causing shares to fall 2% on Tuesday. CEO Daniel Ek will step down in January, transitioning to executive chairman while co-presidents Gustav Söderström and Alex Norström take over.
Sponsored content — provided for informational and promotional purposes.
The Mixed Signals
Here’s the thing about Spotify‘s quarter: it’s basically a tale of two stories. On one hand, they’re still growing subscribers nicely and that price hike is starting to flow through to revenue. But that ad revenue miss? That’s concerning. Advertising makes up about 15% of their total revenue, and seeing it drop while everyone else in digital advertising seems to be recovering suggests Spotify might be losing ground to competitors.
And then there’s the guidance. Why would a company that just beat expectations immediately turn around and issue weak guidance for the next quarter? Either they see something we don’t, or they’re being extremely conservative. Given that they just raised prices across multiple markets, you’d think they’d be more optimistic about Q4. But apparently not.
Leadership Shuffle
The timing of Daniel Ek’s transition is interesting, isn’t it? He’s stepping down as CEO right as the company faces these mixed results. Now, he’s not leaving entirely – he’s becoming executive chairman – but handing over day-to-day operations to Söderström and Norström suggests he thinks the company needs fresh leadership to tackle its next challenges.
Look, Ek built this company from nothing into the global streaming powerhouse it is today. But maybe he recognizes that the next phase requires different skills. The streaming wars have changed – it’s not just about subscriber growth anymore. It’s about profitability, diversification, and competing with giants like Apple, Amazon, and YouTube who have much deeper pockets.
Pricing Push
That price increase across so many markets tells you everything about where Spotify’s priorities lie right now. They’re clearly trying to squeeze more revenue out of their existing user base rather than chasing explosive subscriber growth. And honestly, that’s probably the right move.
But here’s the question: how many more price hikes can they get away with before subscribers start pushing back? We’re already seeing some resistance in mature markets. And if the value proposition doesn’t keep improving alongside those price increases, people might start questioning whether Spotify Premium is still worth it compared to cheaper alternatives.
What’s Next
So where does Spotify go from here? According to their earnings release, Ek says they have “the tools we need” including pricing, product innovation, and eventually an “ads turnaround.” The key word there is “eventually.” They’re basically admitting their ad business needs work, and they don’t have a quick fix.
The new leadership team will inherit a company at a crossroads. They need to prove they can stabilize the ad business while continuing to grow premium subscribers in a saturated market. And they’ll need to do it while fending off competitors who are increasingly bundling music with other services. It’s a tough spot, but not an impossible one. The question is whether the new CEOs can execute where Ek apparently couldn’t.
