Spotify: Pandemic Altering App Usage Patterns

How are consumers using their favorite content-based apps during the pandemic?

Spotify’s latest earnings report offers a fascinating glimpse into these changing habits.

Initially, when the virus first hit particular regions, it looks like people went into survival mode, which meant less time for music, podcasts, and Spotify’s other offerings. Beginning in early February, that resulted in marked declines in daily active users (DAUs) and consumption in especially hard-hit markets like Italy and Spain.

After several weeks, however, people in these areas appeared to adjust to the crisis, and began craving accessible forms of information and entertainment. During this period, Spotify saw new and reactivated monthly active users (MAUs) grow substantially in major markets. (Altogether, it reached 286 million MAUs thanks to a 31% increase, year-over-year.) 

As people around the world continue to shelter in place, they have been less inclined to access Spotify in their cars, as well as on wearables and various Web platforms. 

Yet, more than making up for those losses, the number of people streaming Spotify’s content on their TVs and game consoles has grown in excess of 50% over the same period.

For ad-supported MAUs in the United States, game consoles have been a top platform in terms of consumption for the past month, while connected device usage has been up more than 40% among ad-supported users, worldwide.

Worldwide, Spotify also reports that everyday usage patterns have come to resemble those it was once accustomed to witnessing only on weekends.

This trend pertains more to podcasts than music, which is likely due to the fact that car and commute use cases have changed so dramatically.

Yet, listening time around activities like cooking, doing chores, family time, and relaxing at home have each been up double digits over the past few weeks. 

As the pandemic persists, people report relying more on audio to counteract their increased levels of stress and anxiety. About 40% of U.S. consumers surveyed by Spotify said they had recently increased such activity.

Additionally, searches for “chill” and “instrumental” music are on the rise, while Spotify has seen an uptick in consumption of podcasts related to wellness and meditation.

From a business perspective, Spotify says its strong user growth in recent weeks has reinforced its belief in a “freemium” model.

Historically, over 60% of Spotify’s premium subscribers begin as ad-supported users, so it believes that continuing to grow the top of the funnel will remain beneficial to its ecosystem. (At the end of the first quarter, it boasted 130 million paid subscribers thanks to a 31% increase, year-over-year.)

Of note, about 70% of churned users return to Spotify within 45 days of leaving, which includes coming back through either its premium or ad-supported offerings.

The company also said that hiring was in line with expectations during the past quarter, although it plans to slow hiring for the remaining three quarters of the year.

Overall, however, Spotify seems to be on solid ground. Indeed, its reported revenue of about $2 billion), up 22% year-over-year, and its smallest operating loss (about $18 million), to date.

Still, analysts remain cautious about Spotify’s future.

Among other issues, the company remains perpetually bound to top music labels, which demand massive sums for the right to stream their property, according to Pivotal Research analyst Jeffrey Wlodarczak.

“Any success at, say, podcasts or other non-music related ventures will in our view inevitably be clawed back by the record labels in higher fees,” he warns in a new note to investors.

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