Shares of Spotify SPOT climbed over 5% Thursday after the company announced a new partnership with Samsung in an effort to expand its reach as it tries to fight off Apple AAPL Music’s rapid ascendance.
Spotify’s new deal will see the music streaming company become Samsung's “go-to music service provider.” The Spotify app will be made available to customers when they set up their Samsung phones. The streaming services will also be integrated into Samsung’s smart TVs and other devices.
Spotify is also set to be fused into Samsung’s voice assistant Bixby while becoming the only music service “fully integrated with Samsung Music,” according to a Spotify statement. The big reveal was made at a massive Samsung event at Brooklyn’s Barclays Center, where the world’s biggest smartphone maker unveiled its new Galaxy Note 9.
The Stockholm, Sweden-based company will also see its service intergraded into Samsung’s new Galaxy Home smart speaker, which hopes to take on Apple’s HomePod, Amazon’s AMZN Echo, and Google’s GOOGL Home. For Spotify, the Samsung deal aims to get its app and service in front of as many new users as possible, in order to try to convert them from its recently revamped free service to its revenue-generating premium memberships.
Spotify’s deal comes just one day after Verizon VZ announced on Wednesday that its “Unlimited” customers can get Apple Music free for six months. And obviously, Apple Music comes pre-installed on the iPhone. Still, the announcement sent shares of SPOT up over 5% Thursday to as high as $190 per share, which marked its biggest intraday gain in two weeks.
Spotify is the world’s largest paid music service. The company closed the second quarter with a monthly active user base of 180 million, up 30% from the year-ago period. SPOT’s ad-supported MAUs surged 23% to 101 million. More impressively and importantly, the streaming giant’s premium subscribers soared 40% to close the quarter at 83 million, which also marked a 10% sequential surge from Q1’s 75 million paid customers.
Spotify’s total quarterly revenues jump by 26% to 1.27 billion euros or roughly $1.49 billion. Meanwhile, Spotify’s premium revenues climbed 27% to hit 1.15 billion euros. Investors should note that premium subscribers accounted for roughly 90% of Spotify’s total quarterly revenues, just as they did last quarter.
The company did report an operating loss of 90 million euros or approximately 7% of total quarterly revenues. But the company’s user growth will likely remain a Wall Street focus for some time.
Spotify expects its MAU total to climb by between 25% and 29% to reach between 188 million and 193 million in the third quarter. The firm expects its total premium subscribers to jump between 36% and 43% to reach between 85 million and 88 million in Q3. On top of that, Spotify expects to see its premium subscriber base climb by as much as 37% in fiscal 2018 to anywhere between 93 million and 97 million.
However, investors should note that while Spotify is expected to remain by far the biggest streaming music company, some of the richest companies in the world are ready to challenge it for years to come. Apple Music is reportedly set to pass Spotify in the U.S. this month, despite only being around since 2015—CEO Daniel Ek founded Spotify in 2006.
Meanwhile, Amazon’s Music Unlimited and Google's YouTube Music are both newer threats. The biggest cause for concern is that unlike Netflix NFLX, which has been able to become its own movie and TV studio, Spotify will likely have to pay high music royalty fees forever. Therefore, the trillion-dollar Apple, Amazon, and Google might simply be able to spend Netflix into submission.
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