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Spotify still growing, still losing money — and still without a hi-res option

We’re more than a quarter of the way through 2023. Spotify just announced its first-quarter earnings, with 515 million monthly active users. Some 210 million of them pay for Spotify Premium.

“I really can’t help but feel a tremendous amount of excitement about the progress our team made this quarter,” Spotify co-founder and CEO Daniel Ek said in the earnings call. “In fact, this quarter represents our strongest Q1 since we went public. The last two quarters saw the largest MAU growth in our history.”

But the streaming music service still lacks a hi-res audio option, despite the company having broached the subject two years ago. And so we have to ask ourselves the following question: Does Spotify even need lossless or hi-res? Or spatial audio?

Does Spotify HiFi ever have to see the light of day?

Spotify Premium on an iPhone.
Phil Nickinson/Digital Trends

There’s a good (and easy) argument that it shouldn’t and that it won’t. That argument comes down to money. (As all things do, of course.) While Spotify had a record number of monthly active users and premium subscribers, revenue actually was down 4 percent for the quarter (but up 14 percent year over year), and operating loss was at 156 million euros, or about $172 million. It’s pretty safe to assume a higher-quality file will cost Spotify more to serve up, either from a licensing standpoint or from a pure streaming standpoint, (or both).

Then there’s the basic math of user count. Spotify is still growing, despite Spotify HiFi still MIA, and competitors like Apple Music and Amazon Music lagging far behind. (Neither of those companies gives actual numbers, and the data is messy, but industry estimates put them somewhere around half as much as Spotify. On the other hand, those services are a rounding error for their parent companies.)

And it’s worth noting that there wasn’t a single mention of Spotify HiFi in the Q1 earnings call.

For those who are holding out hope, however, Ek left just a smidge of daylight. Answering a question about new features — specifically the new user interface and AI DJ — he stressed that the company is patient when it comes to new products and features. Painfully patient, really, if you look at it from a user’s point of view.

“We’re rolling it out slowly just to make sure that we have performance dialed up and that we can react to the feedback,” Ek said of the new app interface, “and we’ve already made lots of iterations with the user feedback we’ve gotten. It will be very successful when it’s fully rolled out.”

Spotify Premium on an iPhone.
Phil Nickinson/Digital Trends

Ek basically made Spotify out to be the anti-Twitter. It’s not just going to rush something out because it can. “I’m using this as a moment to educate all investors and analysts as well that there are some product improvements that you just can’t turn the button on,” he said. These are things that we’ve been building on over the last 12 to even 18 months, and in some cases even longer.”

Another possible indication that Spotify HiFi’s non-appearance (don’t call it a delay) may be more about patience and timing than a will to release. And it also could be tied into pricing. Ek reminded everyone that Spotify’s price hasn’t gone up, and basically said to expect it at some point.

“I feel really good about our ability to raise prices over time — that we have that ability,” he said. “And we have lots of data that backs that up. … When the timing’s right we will raise [rates], and I think that price increase will go down well because we’re delivering a lot of value for our customers.”

There’s plenty of value already there, of course. But you also could see Spotify soften the blow of a price increase with the simultaneous launch of something like Spotify HiFi. Where an increase of, say, $4 or $5 a month for Spotify Premium could include a higher-quality audio stream. And to be clear, Ek didn’t allude to Spotify HiFi at all, though he did vaguely mention “three new verticals behind music, podcasts. and audiobooks.” But none of them sounded imminent, and Ek pushed the patience angle even more.

“Again, this is just me kind of more hinting that we have things in the works,” Ek said. “Many of these things that we are working on are not the product of something that we started on three months ago or six months ago. But we have products that have been worked on at Spotify by teams for sometimes two, three, sometimes four years before we’re ready to announce them for the world.”

So maybe Spotify HiFi is still happening, and if so, the company’s patience could indicate that it’s right on track. Or maybe it’s not happening at all.

Only one way to find out.

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