Spotify Q1 hits 100M paying users, 217M overall, beats on sales but loss widens to $159M

As Amazon reportedly gears up to offer its own hi-fi music streaming service, Spotify has posted its Q1 figures. One significant milestone: the world’s currently biggest music streaming service reported that it now has 100 million paying users (up 32 percent on a year ago) and 217 million subscribers overall in 79 markets, picking up 2 million users in India since launching there in February.

In financial terms, however, the picture is more mixed. Its €1.511 billion ($1.68 billion) in sales just beat analysts’ estimates for revenues of $1.64 billion. But earnings per share seems to have taken a big hit. The company, which is still unprofitable, posted negative EPS of €0.79 (or negative $0.88), while analysts on average were expecting only negative EPS of $0.39.

Its net loss is now €142 million ($158.6 million), down from €169 million in the same quarter a year ago.

Spotify as investor also provided an update. It noted that the value of its investment in Tencent Music is now €2.3 billion, going up €652 million in the quarter, and it also confirmed that it paid a total of €358 million for three podcasting acquisitions in the period: €308 million for Gimlet Media and Anchor FM, and €50 million for Parcast. To downplay the size of that deal, or at least provide some more context, it noted that the combined purchase consideration “is roughly equivalent” to Spotify’s cumulative free cash flow over the last three quarters.

This, plus decent guidance for the quarter and year ahead, has made the market relatively happy: Spotify’s shares are up nearly five percent in pre-market trading.

Spotify noted that “most metrics” exceeded the company’s own expectations, although the 217 million monthly active user figure — while up 26 percent — was lower than midpoint of its 215-22- million expectation.

Premium (paid) revenues represent the bulk of Spotify’s revenues at the moment — €1,385 million versus just €126 million from advertising, and still growing at a higher rate than its advertising business (34 percent vs. 24 percent).

Because of that, partnerships, which help to bring in more paid subscriptions, continue to be a huge part of Spotify’s business model. This quarter, it noted that promotions with Google Home Mini and Samsung, and a reduced price of $9.99 for a bundle sold with Hulu, all contributed to its strong revenue performance (however that reduced price provides one clue to why margins are not great). Its group subscriptions — specifically the Family plan — also had a strong impact, it noted.

Guidance for the next quarter and year, meanwhile show continued growth for the company at a relatively similar rate. The thinking is that this should help Spotify eventually even out its losses, although that won’t happen in the year ahead:

For next quarter, Q2, Spotify expects MAUs of between 222-228 million, up 23-27 percent Y/Y; Premium subs of 107-110 million, up 29-34 percent Y/Y; revenues of €1.51-€1.71 billion, up 18-35 percent; gross margin of 23.5-25.5 percent; and an operating loss of €15-€95 million.

For the full-year, Spotify expects MAUs of 245-265 million, up 18-28 percent Y/Y; Premium subs of 117-127 million, up 21-32 percent Y/Y; revenues of €6.35-€6.8 billion, up 21-29 percent Y/Y; gross margins of 22.0-25.0 percent; and an operating loss of €180-€340 million.

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Week-in-Review: Tesla’s losses and Elon Musk’s new promises

What a complicated week for Tesla.

The electric car-maker announced this week that it had lost more than $700 million in the first quarter of 2019, an unpleasant surprise for investors that came during its quarterly earnings report.

But that was just like the 3rd or 4th most interesting piece of Tesla news that took place this week. CEO Elon Musk also avoided writing another check to the SEC for his tweeting habit and Tesla showcased some of its self-driving dreams at an event devoted to autonomy.

Let’s check the news hits out one-at-a-time:

• First, let’s talk Tesla money. On its Q1 earnings call, Tesla CFO Zachary Kirkhorn called it “one of the most complicated quarters.” Investors were already expecting a loss, but a bunch variety of factors led to the $702 million loss which came after two quarters of profitability. Musk had already said that deliveries were lower-than-expected, they ended up shipping 63,000 cars, a nearly one-third drop from the previous quarter. Add that to the partial expiration of the federal electric vehicle tax rebate and there are some answers but still some lingering questions.
• Next, the company laid out some big promises for its self-driving future, but none was more intriguing than Elon Musk announcing that Tesla was planning to launch a robotaxi network in 2020, though the CEO was strong on the caveats that local laws would pretty much guide how such a service was rolled out.

• The company’s Autonomy Day wasn’t just about plans to trounce the soon-to-be-public Uber on its own ride-sharing turf, the company also dove into the hardware, specifically its new “full self-driving” computer that has already started shipping in new Model 3, S and X models. If you look — not very closely — you’ll see that it’s actually two independent computers designed around redundancy so that there’s less room for a glitch to leave drivers in danger.
• Finally, on Friday we learned that Musk and the SEC had reached a deal that let him keep his cash and his Twitter account and avoid being held in contempt of the initial deal. The agreement reach gave Musk a list of topics (list here) that he needs to get pre-approval from Tesla in order to tweet about, a solution that’s probably good for everyone especially the Tesla officials who likely didn’t want to babysit Elon tweeting about anime.

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on Twitter @lucasmtny or email
lucas@techcrunch.com

Trends of the week

Here are a few big news items from big companies, with green links to all the sweet, sweet added context.

• Know when to Fold ’em
  Well, as an update to last week’s “Is Samsung unfolding a flop?“ question, it seems Samsung decided that it probably was doing just that so it has indefinitely delayed the Galaxy Fold’s release to gain a better understanding of what was malfunctioning with the phone’s flexible OLED display. More bizarre: iFixit published a teardown that raised some clear issues with the phone’s build, then brought the post down after Samsung requested its removal via an iFixit partner.
• Give us this day, our one-day shipping
  Amazon is getting ready to make one-day Prime shipping the default sometime. There are tens of millions of Prime subscribers in the US, but while Amazon has been bumping up the annual price, they’ve been trying to sweeten the deal with media plays that feel hit-or-miss sometimes. Making one-day Prime shipping the default would be a game-changer.
• Comcast eyes a Hulu adieu
  Hulu, which was once the convoluted lovechild of entrenched TV network powers-that-be has become a full-on Disney production as of late. After picking up a big slice in the 21st Century Fox deal and some more from AT&T’s Time Warner sale, Disney is reportedly in talks to buy the remaining 33 percent stake in the company from Comcast, which would make Hulu an all-Disney affair.
• How I Broke This
  Mark Zuckerberg has a new podcast, read more about why, and listen to it here.

Special guest

I’m not the first to go wild about enterprise IT, but Box CEO Aaron Levie just published a guest post on TechCrunch about how the world of corporate software has gotten a lot more exciting over the past decade. Check it out.

A new era for enterprise IT

“…We’ve reached a new era of enterprise software and companies are coming around to this model in droves. What seemed unfathomable merely a decade ago is now becoming commonplace…”

Photo by Paul Marotta/Getty Images

GAFA Gaffes

How did the top tech companies screw-up this week? This clearly needs its own section, in order of awfulness:

1. Facebook gets drilled 3X. Kind of cheating since it’s a list, but I’m all about efficiency:
   [Facebook hit with three privacy investigations in a single day]
2. Facebook preps for an upcoming major privacy failure fine:
   [Facebook reserves $3B for future FTC fine]

Extra Crunch

Our premium subscription service continues to churn out some awesome long-reads as a channel for our staff’s niche obsessions. We had a great piece this week on the difficulties associated with determining Huawei’s company ownership, especially when that owner might just be the Chinese Communist party.

Why it’s so hard to know who owns Huawei

“…despite selling 59 million smartphones and netting $27 billion in revenue last quarter in its first-ever public earnings report this morning, a strange and tantalizing question shrouds the world’s number two handset manufacturer behind Samsung. Who owns Huawei?”

Here are some of our other top reads this week for premium subscribers — our staff seemed to write a lot about pitching stories this week…

• How to pitch to a (tech) journalist
• The master list of PR DON’Ts
• Why your CSO, not your CMO, should pitch your security startup

Want more TechCrunch newsletters? Sign up here.

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Samsung sees Q1 profit plummet 60%

Samsung’s Q1 earnings are in and, as the company itself predicted, they don’t make for pretty reading.

The Korean giant saw revenue for the three-month period fall by 13 percent year-on-year to 52.4 trillion KRW, around $45 billion. Meanwhile, operating profit for Q1 2019 came in at 6.2 trillion KRW, that’s a whopping $5.33 billion but it represents a decline of huge 60 percent drop from the same period last year. Ouch.

Samsung’s Q1 last year was admittedly a blockbuster quarter, but these are massive declines.

What’s going on?

Samsung said that sales of its new Galaxy S10 smartphone were “solid” but it admitted that its memory chip and display businesses, so often the most lucrative units for the company, didn’t perform well and “weighed down” the company’s results overall. Despite those apparent S10 sales, the mobile division saw income drop “as competition intensified.” Meanwhile, the display business posted a loss “due to decreased demand for flexible displays and increasing market supplies for large displays.”

That’s all about on par with what analysts were expecting following that overly-optimistic Q1 earnings forecast made earlier this month.

The immediate future doesn’t look terribly rosy, too.

Samsung said the overall memory market will likely remain slow in Q2 although DRAM demand is expected to recover somewhat. It isn’t expecting too much to change for its display business, either, although “demand for flexible smartphone OLED panels is expected to rebound” which is where the company plans to place particular focus.

On the consumer side, where most readers know Samsung’s business better, Samsung expects to see improved sales in Q2, where buying is higher. It also teased a new Note, 5G devices — which will likely limited to Korea, we suspect — and that foldable phone.

The Galaxy Fold has been delayed after some journalists found issues with their review units — TechCrunch’s own Brian Heater was fine; he even enjoyed using it. There’s no specific mention in the quarterly report of a new launch date but it looks like the release will be mid-June, that’s assuming what AT&T is telling customers is accurate. But we’ll need to wait a few weeks for that to be confirmed, it seems.

Samsung says it will announce a revised launch date for the Galaxy Fold in the next few weeks.
Executives are speaking on a 1Q earnings conference call.

— Tim Culpan (@tculpan) April 30, 2019

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Samsung made a vertical TV for watching smartphone videos

So it’s come to this. After years of letter boxes and angry commenters, the electronics world is finally giving in and developing hardware designed to view vertical videos. Time to pack it in, the portrait mode shooters have won, and their prize is this ridiculous 43 inch TV from Samsung.

The Sero joins a handful of other strange new takes on the flat panel TV, but none speak to the current state of things more than this swiveling set. The design calls to mind Facebook’s high end portal, with a screen that does double duty. There’s landscape for standard viewing and portrait for, you guessed it, social media.

It’s a system targeted primarily at millennials, according to the company’s press material — specifically millennials with a money to burn, with a price north of $16,000. Seems like a lot to ask, but what do I know? I’ve been holding my phone sideways the whole time.

The quantum-dot QLED set features 4.1 channel audio, 60 watt speakers and your friend and mine, Bixby. It’s due out in Korea next month, but I wouldn’t hold my breath for a release here in the States.

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Is this the vertical-folding Motorola Razr?

This could be the upcoming Motorola Razr revival. The images purporting to be the upcoming smartphone appeared online on Weibo and show a foldable design. Unlike Galaxy Fold, though, Motorola’s implementation has the phone folding vertical — much like the original Razr.

This design offers a more compelling use case than other foldables. Instead of traditional smartphone unfolding to a tablet-like display, Motorola’s design has a smaller device unfolding to a smartphone display. The result is a smaller phone turning into a normal phone.

Pricing is still unclear but the WSJ previously stated it would carry a $1,500 cost when it’s eventually released. If it’s released.

Samsung was the first to market with the Galaxy Fold. Kind of. A few journalists were given Galaxy Fold units ahead of its launch, but a handful of units failed in the first days. Samsung quickly postponed the launch and recalled all the review units.

Despite this leak, Motorola has yet to confirm when this device will hit the market. Given Samsung’s troubles, it will likely be extra cautious before launching it to the general public.

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Is the Samsung Galaxy Fold a bad omen for foldables?

I wrote a lot about the Galaxy Fold here. After a week with the device, I was left with mixed feelings independent of the whole ongoing display saga. The TLDR; of it is the story of a first-generation device that’s full of promise but still a bit clunky and prohibitively priced.

Of course, the real reason we couldn’t possibly recommend the device is the high percentage of issues around the device. Samsung issued a handful of early units to reviewers and multiple devices returned with broken screens. Samsung was quick to downplay the issue, but ultimately apologized, issued early findings and pushed the release back to an undisclosed date.

The Fold was supposed to be released today, and until Monday, Samsung had us convinced that it would hit that optimistic time frame. The fact of it all, however, is that the timing was always in question. The device was officially unveiled at an event in February. A week later at Mobile World Congress, the closest we got to the device was the other side of a plate of display glass and a velvet rope. It doesn’t exactly instill confidence in a product.

Later that day, Huawei gave us hands-on time with its own (still unreleased) foldable, the Mate X. Granted, the time was limited and a rep was hovering over us the whole time, but being able to touch the device goes a long way.

For the moment, Samsung’s in lockdown mode. Reviewers (ourselves included) have returned the devices at the company’s behest. A week with the phone was always the plan, as Samsung was likely planning to send it out to additional reviewers. I suspect all the breakages have put the brakes on that for now.

More notably, Samsung convinced iFixit to pull a lengthy teardown that referred to the Fold’s display as “alarmingly fragile.” The write-up has been replaced by a lengthy note explaining the site’s position and Samsung’s role in the takedown:

We were provided our Galaxy Fold unit by a trusted partner. Samsung has requested, through that partner, that iFixit remove its teardown. We are under no obligation to remove our analysis, legal or otherwise. But out of respect for this partner, whom we consider an ally in making devices more repairable, we are choosing to withdraw our story until we can purchase a Galaxy Fold at retail.

It’s easy to understand why the piece irked Samsung, of course, but it’s hard to imagine that it did much additional damage to an already problematic situation. We covered the story, along with dozens of other sites. I personally found it an insightful look at the product, as iFixit described a display that wasn’t sufficiently reinforced and an otherwise impressive gear system that let dirt and debris fall behind the screen.

In fact, Samsung’s own “initial findings” were actually pretty well in line with iFixit’s:

Initial findings from the inspection of reported issues on the display showed that they could be associated with impact on the top and bottom exposed areas of the hinge. There was also an instance where substances found inside the device affected the display performance.

From the outset, many were suspect about the product’s ability to hold up to real-world stresses without the presence of a Gorilla Glass-like screen covering. Corning has already noted that it’s working on just such a flexible material, but Samsung didn’t seem much interested in waiting.

In retrospect, the process of bringing the technology to market felt like a thoughtful, leisurely progression, followed by a potentially careless sprint the final few yards before the end zone. While Samsung had been showcasing flexible display technology since CES 2011, it no doubt saw the writing on the wall heading into this year. Royole had already launched its own reference device, and the week following the Fold’s announcement, we saw the aforementioned handset from Huawei and a reference design from TCL. Xiaomi showed off its own project at around the same time, and leaks have highlighted competition from companies like Motorola.

Samsung, it seems, wanted badly to be the first to market with a consumer device. It’s a stumble, but as we’ve pointed out previously, Samsung’s been through worse. This isn’t the Galaxy Note 7 part two for two key reasons:

1. The product didn’t officially ship, so these devices could be considered a kind of (very public) extended beta
2. Nothing actually exploded and the Fold hasn’t been banned from any airlines

The broader question, however is two-fold:

1. What will this mean for Samsung
2. What will this mean for foldables as a category

The answer, I think is the same for both: not very much. Both the phone and the category will live and die by consumer demand, not some dumb stumble by Samsung.

Huawei’s got a golden opportunity to show what can be done here (even though ongoing legal troubles will make the Mate X tough to come by in the U.S. And in spite of how well the first Fold sells, it seems likely that Samsung has a sequel in the works. Remember how masterfully the company spun the Note after the smoke had cleared? The arrival of its eight-point battery testing turned battery safety from a concern to a feature.

Of course, this will be a short-term setback from the company and product. Consumers will smartly be cautious, even after the company says it’s hammered out the original issues and firmed up a release date. If there’s major learning from the Note debacle that can be applied here, it’s that companies can be too eager to sound the all clear. Remember, the Note 7 was subject to two recalls.

But like the Note 7, these early misadventures will likely do little to impact the future of foldables — or Samsung’s bottom line.

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Verizon announces 20 5G markets for 2019, as Samsung Galaxy S10 5G preorders open

Analysts have been all too happy to discuss 5G’s cart and horse problem, even as they wax poetic about the wireless technology’s future. Networks require devices and devices require networks. And while many have positioned 2019 as the year of 5G, both seem to be trickling out at a 2G rate.

Verizon (disclosure: our parent company’s parent company) just revealed a one-two punch, opening up preorders for the Galaxy S10 5G and announcing a list of 20 cities that will be getting the technology before year’s end.

The markets run coast to coast in the continental United States, including: Atlanta, Boston, Charlotte, Cincinnati, Cleveland, Columbus, Dallas, Des Moines, Denver, Detroit, Houston, Indianapolis, Kansas City, Little Rock, Memphis, Phoenix, Providence, San Diego, Salt Lake City and Washington DC.

That bunch join Minneapolis and Chicago, which had 5G turned on in certain areas earlier this month.

The S10 5G, meanwhile is the first of two 5G phones announced by Samsung this year. The company will also be selling a 5G version of the Fold in certain markets — assuming it gets to the bottom of the base model’s screen issues. One assumes that a 5G version of the Note is also in the works.

At $1,300 for the 256GB model and $1,400 for the 512GB version, the 5G model is a downright bargain compared to the Fold, which starts at $1,980. We can probably expect 5G models to be priced north $1,000 for a little while, at least. There are also carrier contracts available if renting to own is your thing.

When I interacted with the S10 5G earlier this year, there wasn’t much to discuss, as it was a dummy model that wouldn’t actually turn on. But you can expect something like a premium version of the Samsung flagship with a larger battery to deal with that extra 5G power consumption.

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