![]() ![]() ![]() Premium services don't have that problem. The gross margin for ad-supported streams was 4.4% in the first quarter, and that's before considering common operating costs such as sales and marketing, product development, and employee salaries. As a result, music royalties generally consume nearly all of the company's incoming ad revenue. The company walks a thin line between running enough ads to turn a profit and limiting the advertising time to keep the free users tuned in. Spotify's ad-supported service is a notoriously low-margin operation. These premium content creators were effective eardrum magnets for Spotify in the first quarter, and they should continue to pull in new customers in the coming quarters. ![]() Recent additions to Spotify's stable of podcast hosts include pop star Taylor Swift, comedian Joe Rogan, and the pairing of rock legend Bruce Springsteen with former President Barack Obama. Spotify is making heavy investments in exclusive content, both with popular music and in the podcast arena. Still, there is nothing wrong with Spotify's customer growth charts. Currency exchange effects should continue to weigh on Spotify's top and bottom lines for the rest of 2021. The company expects to add roughly 14 million net new MAUs in the second quarter alongside 6 million premium subscribers. The average revenue per user (ARPU) fell 7% in dollar terms but came in just 1% lower as measured in constant currencies. Revenue posted a smaller gain of 16%, mostly due to unfavorable currency exchange trends. The number of premium subscribers increased 21% to 158 million names. In the first quarter of fiscal year 2021, total monthly active users (MAUs) rose by 24% to 356 million accounts. The growth engines under Spotify are running smoothly so far. Should investors load up on Spotify shares at these lower prices, or is the stock losing value for a good reason? The good The stock is trading 38% below February's all-time highs, having lost 19% of its market value over the last three months. Media-streaming specialist Spotify Technology ( SPOT 6.72%) is hardly setting the investing world on fire these days.
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