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Spotify reported quarterly results on Wednesday morning.

Dado Ruvic/Reuters

Spotify Technology SA on Wednesday forecast current-quarter revenue largely below analysts’ estimates, as the streaming service spends more on promotions to lure listeners in its battle against Apple Music and Amazon.

Shares of the Swedish company were down 5 per cent at $147 in midday trading.

Spotify’s paid subscriptions rose a better-than-expected 29 per cent in the fourth quarter, largely from discounted promotional plans.

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The company ran several campaigns in the quarter, including a “3 months on us” intro offer for new users and a win-back offer for returning customers.

Spotify is also spending more on podcasts, trying to keep pace with its two closest rivals - Apple Music with more than 60 million subscribers as of June and Amazon, which has more than 55 million subscribers globally.

Paid subscribers, which make up nearly 90 per cent of its revenue, tallied 124 million for the three months ended Dec. 31. Analysts on average expected 122 million, according to FactSet.

The company forecast first-quarter premium subscriber numbers largely in line with estimates. It expects total premium subscribers in the range of 126 million to 131 million for the first quarter compared with the estimate of 128 million, according to FactSet Estimates.

But Spotify reported a decline in average revenue per user (ARPU) for the fourth quarter.

“Our ARPU was down 5 per cent in Q4 and we expect similar declines for 2020,” Chief Financial Officer Paul Vogel told Reuters.

Spotify also said it bought The Ringer, the sports and entertainment podcast network founded by Bill Simmons, for an undisclosed price.

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“What we really did with The Ringer, I think, is we bought the next ESPN,” said Chief Executive Officer Daniel Ek in a post-earnings call.

“And we think that’s going to be a tremendously valuable property as we look at the development of sports over the next decade.”

The company, which launched its music service over a decade ago, has invested over $500 million to build its podcast business and currently has over 700,000 podcast titles.

“It’s clearer than ever to us that podcast listening is driving the overall health of our business,” Ek said.

Fourth-quarter revenue rose 24 per cent to 1.86 billion euros ($2.05 billion), missing expectation of 1.89 billion euros, according to IBES data from Refinitiv.

Spotify expects first-quarter revenue in the range of 1.71 billion euros to 1.91 billion euros, compared with estimate of 1.90 billion euros.

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The company reported a loss attributable to shareholders of 209 million euros, or 1.14 euros per share, hurt mainly by social costs in Sweden.

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