Spotify ended 2022 with 205 million subscribers, annual revenue of 11.7 billion euros ($12.4 billion) — up 21% from 2021 — and an acknowledgment that “things change” regarding the company’s investment in podcasting and its recent “tightening” of spending.
“In hindsight I probably got a little carried away and over invested relative to the uncertainty we saw shaping up in the market,” said CEO Daniel Ek in an earnings call with investors on Tuesday (Jan. 31). “So we are shifting to tightening our spend and becoming more efficient.”
Ek added that “it was the right call to invest and I would do it again” because it set the company apart from competitors, but the souring macro economic environment requires them to pull back. “To be clear this doesn’t mean we are changing our strategy,” he asserted.
The company spent hundreds of millions of dollars acquiring exclusive rights to podcast programming (see: Joe Rogan, Prince Harry and others) and startups, but in recent months began eliminating some original shows and trimming staff at its Parcast and Gimlet studios. Earlier this month, Spotify announced it would shed 6% of its workforce, roughly 600 employees. It also canceled numerous shows that it had been promoting on its separate Spotify Live app.
“You go for growth first and then you seek efficiency,” Ek said.
Spotify Went Hard for Podcasts — But Layoffs (and a Big Departure) Signal a Change
Elsewhere in the call, the company laid out its fourth-quarter results, with revenue of 3.166 billion euros ($3.38 billion), representing 18% growth year-over-year. Subscription revenue was 2.7 billion euros ($2.88 billion) of that tally, a 18% increase year over year. Advertising revenue was 449 million euros ($479 million), up 14% year over year. Its user base grew to 205 premium subscribers, up from 195 million in Q3, and 295 million free (ad-supported) users, up from 273 million. Total monthly active users (MAUs) have hit the 489 million mark, up from 456 million last quarter.
Average revenue per user was 4.55 euros ($4.85) in the fourth quarter, down slightly from 4.63 euros ($4.94) in the third quarter. Excluding the impact of the foreign exchange market, Spotify attributed the change to a “product and market mix.”
Spotify’s gross margin of 25.3% — 80 basis points above guidance, the company said — was slightly better than the 24.7% registered in the third quarter but still a full percentage point below the 26.5% in the prior-year period. The company attributed the change to “lower investment spending and broad-based music favorability.”
Spotify reported an operating loss of 231 million euros ($246 million), up from 228 million euros in Q3 and a 7 million euro loss back in Q4 2021. A slew of higher personnel costs due to headcount growth — that has since been halted (except for internships) — and higher advertising costs, as well as currency movements, was cited for the rise in losses during the quarter. The company also said that its business has more than 3.4 billion euros ($3.6 billion) in liquidity and that its free cash flow was actually in the negative in the quarter — by 73 million euros — but that for the full year the company ended with 21 million euros ($22 million).
Financial Metrics (Q4 2022 vs. Q4 2021)
Revenue: 3.166 billion euros ($3.38 billion), up 18% year over year from 2.689 billion euros
Gross margin: 25.3%, compared to 26.5% the prior-year quarter
Operating loss: 231 million euros, up from a 7-million euros loss
Free cash flow: 73 million euros, down from 103 million euros
Listener Metrics (Q4 2022 vs. Q3 2022)
Paid subscribers: 205 million, up 5% from 195 million in Q3
Ad-supported listeners: 295 million, up 8% from 273 million in Q3
Total monthly active users (MAUs): 489 million, up 7% from 456 million in Q3
Average revenue per subscriber: 4.55 euros, up from 4.63 euros in Q3
The University of California Annenberg Inclusion Initiative is back with its annual report on inclusion in the recording studio and, consistent with previous years, it found that women have been woefully underrepresented across the recorded music industry — though some gains have been made. “There is good news for women artists this year,” said Dr. Smith in a release. “But let’s not get ahead of ourselves — there is still […]
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