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Spotify hits 365 million listeners, but COVID and email snafu cost it millions

Spotify didn't recruit as many new listeners as expected, partly because of a problem verifying email addresses for new signups, missing out on 1 million to 2 million new users.

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Angela Lang/CNET

Spotify's total number of listeners climbed 22% to 365 million in the second quarter, the global music streaming service said Wednesday, a slower pace of growth than expected. Explaining the slowdown in the growth of total listeners, Spotify again pointed to COVID-19 effects in some regions, which have crimped people's interest in listening to music on the go, since you can't go very far during lockdowns. 

But it also failed to notice a problem with its system verifying new signups by their email addresses linked to one unspecified "global third-party platform." Spotify didn't name the platform but acknowledged the verification problem was caused by a change it made on its own end. Spotify has fixed the issue, but not before the flub cost it about 1 million to 2 million new accounts. 

COVID hampered Spotify from adding as many new members especially in markets like India, where the disease was in a devastating stage during the latest period. 

Spotify had already been extremely cautious about growth this year because of the COVID-19 pandemic, and the latest results prompted it to tighten its expectations for total listeners for the full year too. It now expects to end the year with between 400 million and 407 million listeners who tune in at least once a month. Three months ago, it had said it was aiming for 402 million to as many as 422 million active listeners at the end of the year. 

"I look at it as a bump in the road," Spotify cofounder and CEO Daniel Ek said Wednesday morning on a call to discuss the results. 

But in the latest period, Spotify's paid members -- which excludes all the people who listen free with advertising -- rose 20% to 165 million, meeting expectations. Spotify makes more money from its paying subscribers than the ones who listen free with ads. 

Spotify shares were down 2.5% to $231 in light premarket trading. 

Even with the slowdown in total listeners, the latest figures reiterate Spotify's dominance in subscription music around the world. The company appeared to remain above its No. 2 competitor, Apple Music. Apple doesn't routinely disclose its paid membership and hasn't offered an update in (checks watch) more than two years, obscuring just how much of a lead Spotify may have. Though Apple Music has surely grown in that time, it hasn't revealed the size of its subscriber base since June 2019, when it was just 60 million members to Spotify's now 165 million. 

Unlike SpotifyApple doesn't have a free tier that lets anyone listen to music with advertising. Apple has never disclosed a monthly-active-user stat; almost all people who use Apple Music are subscribers.

Apple didn't immediately respond to a request for comment on Apple Music's growth. 

As culture at large has shifted to streaming as the most common way people listen to tunes, Spotify and Apple Music emerged as the leaders in a race to dominate subscription music. Though Spotify remains the biggest streaming service by both listeners and subscribers, Apple Music has benefited from the popularity of the iPhone to recruit new members. 

Read more: Best streaming music service

Spotify said Wednesday that even though it didn't add as many new listeners as it hoped, the ones it already has are listening to Spotify for longer, getting back to levels of usage that were more typical before the pandemic. The company is still engrossed in its campaign to expand podcasts on its service, aiming to make Spotify the go-to place not only to stream tunes to also to hear talk-style programming too. During the second quarter, podcasts portion of Spotify's total listening hours reached an all-time high.

For the second quarter, Sweden-based Spotify reported a loss of 20 million euros ($23.6 million at current conversion rates), or 19 cents a share, narrowing from a loss of of 356 million euros, or 1.91 euros a share, a year earlier. Revenue rose 23% to 2.33 billion euros in the quarter.

Analysts on average had expected a loss of 36 cents in the latest period, on revenue of 2.29 billion euros, according to Refinitiv Eikon. 

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