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Spotify adds 8 million paying customers in three months

And it's inching closer to real profitability.
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Daniel Boczarski via Getty Images

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In the three months since Spotify crested the 100 million Premium user mark, the company has added another 8 million paying customers. It's another sign of health from a music streaming service that continues to grow in the face of tough and well-heeled competition. In its second-quarter earnings, Spotify said that its overall membership grew from 217 million last quarter to 232 million now.

Spotify says that the growth in both free and paying customers is down to a number of initiatives, including "long-term retention" of users. In addition, new products, like the stripped-down Spotify Lite, designed for countries where data is at a premium, launched in 36 territories during the quarter. Spotify Stations, its Pandora-like experience, is also being tested in the US, and other experiments are apparently forthcoming.

108 million Premium users is nothing to sniff at, but Spotify is concerned that it's not quite close enough to its planned target of 110 million. The company says that its "winback" campaigns -- when people who don't continue paying for the product get offered a further three months at discount, are working. If there's a weak spot, it's the student plans, although Spotify says it was a failure of "execution," rather than of business.

The Swedish company pulled in $1.8 billion in revenue, of which $1.6 billion was premium subs, with the other $200 million coming from advertising. Spotify believes that its increased investment in podcasts and podcasting -- with the purchases of several studios -- is fostering a boom in podcast advertising. And the expectation is that podcast ads will become a bigger part of Spotify's overall product by the end of 2020.

Podcasts are clearly the biggest driver of growth for Spotify, and in three months, the company saw listener figures increase by more than 50 percent. And those figures can increase further after Spotify said it would team up with the Obamas' production company, Higher Ground, for exclusive audio content.

The company's net loss this quarter came to $84.7 million, close to half the loss it made in the previous period. Spotify has, once again, opted to throw its employees under the bus, attributing the losses to "social costs." That boils down to that, because Spotify's stock price rose, and its employees receive stock-related compensation, the company had to pay more tax to the Swedish government.

Spotify expects to see user numbers hit up to 245 million by the end of the next quarter, and 265 million by the end of the year. And, by the end of Q4, the company is hoping to have 125 million paying customers, although that still wouldn't see it making a decent profit. On the upside, Spotify has already reached a deal with two of the four major labels to keep their content on the platform, at least for the near future.

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