Deezer’s Earnings Boosted by Streaming Subscription Price Increases
French music streaming company Deezer posted revenue of 115 million euros ($112.5 million at the Sept. 30, 2022 exchange rate) in the third quarter, up 13.8% from the prior-year period (11.4% at constant currency), the company announced Thursday. Following the news, Deezer’s stock closed up 0.59% on Friday (Oct. 28).
The quarter was bolstered by a 13.8% improvement in average revenue per user (ARPU) to 3.9 euros ($3.81) from the third quarter of 2021. Deezer attributed the improvement primarily to price increases implemented in France in January 2022 — individual plans increased from 9.99 euros to 10.99 euros per month and family plans climbed from 14.99 euros to 17.99 euros per month.
Other subscription services have followed — or likely will follow — Deezer’s lead in raising prices. Apple’s decision on Monday to raise prices on Apple Music “was extremely good news for us,” said Deezer CEO Jeronimo Folgueira during Thursday’s earnings call.
Folgueira also encouraged by comments made Tuesday by Spotify CEO Daniel Ek about possible price increases in early 2023. “We have been the first ones to raise prices very successfully and now that the competitors follow, obviously that is a good thing for the industry as a whole,” Folgueira said. “It also makes us more competitive once competitors increase prices.”
Folgueira does not expect Deezer to further raise prices in 2023 but he didn’t rule it out, either. “We always remain flexible when it comes to pricing,” he said.
Deezer’s ARPU growth was partially offset by a higher proportion of family plan subscriptions, which carry a higher price than individual plans but allow up to six subscribers per account. At the same time, Deezer saw strong business-to-consumer subscription growth in France, adding 300,000 to 3.4 million in its home market. The ARPU gain more than compensated for a 2.5% decline in total subscribers to 9.4 million — the same number as the second quarter of 2022.
Outside of France, Deezer’s B2C subscribers fell 15.8% year-over-year, from 2.7 million to 2.2 million, although the loss in the third quarter was a more modest 4.4%, or 100,000 subscribers. That decline was due to Deezer’s decision to focus more on a smaller number of larger markets — including France, Germany, U.S. and Brazil — and reducing unprofitable spending in elsewhere. Also, Deezer shut down its business in Russia at the end of the first quarter.
The company expects to finish the year with about 455 million euros ($445 million) of revenue, a 14% improvement from 2021. Deezer expects to see benefits from its new partnership with media company RTL in Germany in the second half of the year. More price increases should help bolster ARPU and revenues, too. In an Oct. 4 investor presentation, Deezer revealed it plans to raise prices in the U.S. and Germany in October and Brazil in December. Additionally, Deezer will increase the price on all existing iOS users in November, which Folgueira said “willl have a substantial impact” on fourth-quarter earnings results.