Spotify losses surge after podcast spending binge
The boss of Spotify has admitted he got a “little carried away” as a spending binge on new podcasts and expensive hosts drove the streaming service to a deeper loss at the end of last year.
Daniel Ek said his response to whether he regretted the investment drive was “no and yes”, insisting: “I still believe it was the right call to invest and I would do it again.”
But he added: “In hindsight I probably got a little carried away and over-invested relative to the uncertainty we saw in the market.”
The comments came as the Swedish company posted an operating loss of €231m (£187m) in the fourth quarter. This was far deeper than the €7m loss recorded in the same period in 2021, though it was less severe than the €300m previously forecast.
Spotify said its profitability was hit by significant investments in new podcast content, which offset stable margins in its music business and improved podcast profitability.
The company’s operating margin stood at -7.3pc in the fourth quarter, down from -0.3pc the previous year.
Spotify has poured billions of euros into its podcast operations in recent years, signing up stars including Joe Rogan and the Duke and Duchess of Sussex for lucrative multi-year deals.
But it is now battling a slowdown in the sector, while a looming advertising recession threatens to squeeze its margins further.
Spotify is racing to cut losses and has vowed to improve efficiency. Last week the firm said it was cutting 6pc of its workforce and announced the departure of chief content office Dawn Ostroff.
Mr Ek said Spotify was exploring increases in subscription prices in 2023, following similar moves by both Apple Music and Amazon Music, but did not say how big the price hikes will be.
Despite this, the platform reported strong subscriber gains at the end of the year, with its total monthly active users jumping by a fifth year on year to 489m.
This came after a 33m gain in the last three months of the year – its biggest ever increase in the fourth quarter.
Premium subscribers – the company’s primary source of revenue – beat expectations to rise 14pc to 205m.
Overall, revenue in the fourth-quarter grew 18pc to €3.2bn. Shares rose 10pc, taking Spotify’s market value to more than $19bn.
Spotify forecast modest subscriber growth in the first quarter, with total monthly active users rising to 500m and 207m premium subscribers.
The company expects revenue of €3.1bn in the first three months of the year and an operating loss of €194m, including a charge of up to €45m from severance payouts.
It came as new figures showed the number of live music gigs in the UK has dropped by a sixth over the last four years as the sector reels from the impact of the pandemic and a deepening cost-of-living crisis.
There were 177,000 live performances last year, down by almost 17pc compared to 2019, according to the Music Venue Trust (MVT).
The lobby group, which represents around 1,000 grassroots music venues, said many venues had been forced to make cutbacks to continue operating solvently.
Audience numbers also fell 11pc from pre-pandemic levels in a sign that music fans are tightening their belts.
Mark Davyd, chief executive of the MVT, said: “Obviously we are pleased to highlight the fact that grassroots music venues contribute over half a billion pounds to the UK economy and to emphasise their enormous impact on the cultural life of our country.
“But it is also necessary to reiterate the precarious financial position that much of the sector still finds themselves in – the current economics no longer stack up.”
The MVT called for a reduction in VAT on venue ticket sales, as well as a review of “excessive and anti-competitive” business rates.