Spotify Hits 236M Paying Subs, Loss Narrows Despite Charges for Layoffs
Audio streaming giant Spotify posted better-than-expected subscriber gains as part of its fourth-quarter and full-year 2023 earnings report on Tuesday. It also reported a narrowed fourth-quarter operating loss despite charges for layoffs related to its efforts to push toward sustainable profitability, with its bottom line helped by price increases, cost reductions and growth in its advertising business.
And Spotify CEO Daniel Ek on a morning call told investors to expect more cost-cutting in 2024 as the music streaming platform continued to pursue a more disciplined approach to future growth and profitability.
More from The Hollywood Reporter
The company ended 2023 with 236 million paying premium subscribers, up from 226 million as of the end of September and compared with its forecast that it would reach 235 million in the latest period. “Fourth-quarter net additions of 10 million contributed to a record full year of net additions of 31 million,” the firm highlighted.
Stockholm-headquartered Spotify also reported that it hit 602 million monthly active users (MAUs) as of the end of 2023, up from 574 million at the end of the third quarter. The company had previously estimated it would end the latest period with 601 million MAUs. “Net additions of 28 million represented the second-largest fourth-quarter net addition performance in our history,” the company said on Tuesday.
Ek told analysts during a morning conference call that the music streaming giant would continue to cut costs, which may include additional job cuts in 2024, after a recent restructuring and a stepped-up focus on profitability. In Dec. 2023, Spotify cut 17 percent of the company’s global workforce as the streaming platform continues to focus on “monetization and efficiency,” Ek recalled on a morning call.
“We’re going to continue to be more resourceful with the resources we have. That’s just the new modus operandi,” Ek said. Amid escalating costs, Spotify has been undertaking several cost-cutting measures. The streaming giant laid off 200 employees in June, after previously laying off 600 employees in January and conducting layoffs in October. It then laid off 17 percent of its staff in December.
But Ek also responded to industry concerns Spotify will compromise future growth for greater near-term profitability. “Make no mistake, we will continue to make bold bets, invest and seize on opportunities when they make sense, but hopefully it’s clear now with a much more disciplined approach going forward,” the Spotify CEO added.
Ek also responded to a question about podcasting, and indicated Spotify was close to break-even in that business. To get to profitability, Spotify will continue to leverage existing audiences for podcasting for greater revenue, while also ending podcast talent deals that weren’t working.
Spotify last year ended an exclusive podcasting deal with Prince Harry and Meghan Markle, while also merging podcasting studios Parcast and Gimlet into a single division after canceling 10 shows from the two companies. Ek also talked about Joe Rogan striking a new multiyear deal with Spotify, but no longer seeing his podcast distributed exclusively by the platform.
The Spotify head said non-exclusive deals allowed the platform to drive greater advertising revenues, while also allowing creators greater audience growth of their own on other platforms. “Exclusivity makes sense when you’re the smaller player trying to gain scale. When you’re the bigger player, the additional value of exclusivity is far smaller,” Ek argued.
Last week, Spotify struck a new multiyear podcast deal with Joe Rogan. As part of its, The Joe Rogan Experience show, which has been the top podcast of the year globally at Spotify for the past four years, will soon be distributed across several podcast platforms, as well as on YouTube, rather than remaining exclusive to Spotify. In addition to distribution, Spotify will handle advertising sales for the podcast.
And he reiterated Spotify’s criticisms of Apple choosing to comply with the EU’s Digital Markets Act (DMA), which threaten higher fees for app developers and reduced profitability. “It think it’s a bit of a farce because it looks on the surface that they’re complying with (DMA). But behind the surface, they’re doing pretty much everything to make this such an attractive experience that no sane developer would want to pick any of the new terms,” Ek said, while adding Spotify will stick with the current system.
During the latest quarter, Spotify’s quarterly operating loss amounted to €75 million ($80 million), “which was better than our updated guidance,” it said, and compared to €270 million in the year-ago period. “Excluding one-time charges, we generated €68 million ($73 million) in adjusted operating profit, which is more than double the third quarter as the business continues momentum towards sustainable growth and profitability,” it highlighted. The charges amounted to €143 million ($153 million) and were “associated with efficiency actions taken late in the quarter,” Spotify said. In the third quarter, the company had swung to a surprise operating profit of €32 million.
Fourth-quarter revenue jumped 16 percent to €3.67 billion ($3.94 billion), in line with the company’s forecast.
Premium revenue grew 17 percent, or 21 percent when assuming constant currencies, “reflecting subscriber growth of 15 percent year-over-year and a premium average revenue per user (ARPU) increase of 1 percent year-over-year to €4.60 ($4.94), or up 5 percent constant currency,” Spotify said. “Excluding the impact of foreign exchange, ARPU performance was driven by price increase benefits, partially offset by product and market mix.”
Ad-supported revenue grew 12 percent, or 17 percent in constant-currency terms, reflecting growth across all regions, hitting what the company said was an all-time high of €501 million ($538 million). “Music advertising revenue grew double-digits driven by growth in impressions sold and stable pricing,” the company said. “Podcast advertising revenue grew in the healthy double-digit range, driven by significant growth in sold impressions across original and licensed podcasts and the Spotify Audience Network, partially offset by softer pricing.”
For the current first quarter, it forecast operating income guide of €180 million, which Guggenheim analyst Michael Morris called “well ahead of our/consensus estimates of €121 million/€92 million.”
Best of The Hollywood Reporter
Meet the World Builders: Hollywood's Top Physical Production Executives of 2023
Men in Blazers, Hollywood’s Favorite Soccer Podcast, Aims for a Global Empire
