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Spotify Lost $661 Billion Last Year

Spotify has delivered a mixed bag of results, boasting of an unexpected jump in premium subscribers, while admitting that losses ballooned in what it dubbed “an investment year for the company.”

The leading audio streaming service added 10 million premium subscribers in the December quarter, pushing its number to 205 million. Spotify expects to cross the half-billion user mark this quarter, including all ad-supported and paid subscriber tiers.

The company also exceeded Wall Street estimates with A$4.86 billion in revenue.

So, that’s the good news.

The company’s losses ballooned in the final three months of 2022, with A$414 million in losses for the quarter, versus ‘just’ A$60 million during the same period in 2021.

For the whole year, losses reached A$661 billion, compared to revenue of A$18 billion.

Operating Expenses grew by 44 per cent, driven primarily by higher personnel costs related to its huge investment in the podcast space, as well as headcount growth in its global ad sales team, and its higher advertising expenses to target “emerging markets” and “Gen Z”, according to the company.

“These investments largely reflect various growth initiatives that were greenlit toward the end of 2021 and the impact of recent acquisitions such as Podsights, Findaway, Sonantic, Chartable, Whooshkaa and Heardle,” Spotify notes.

“As we stated throughout the last year, 2022 was an investment year for the company with our Operating Expenses growing faster than Total Revenue. Moving forward, we expect to see more company wide efficiencies with our expectation that Total Revenue will begin to grow faster than Operating Expenses.

“As a result, we anticipate a meaningful improvement in our Operating Expense ratios and Operating Income/(Loss) in 2023 and beyond.”

This was all augured by last week’s announcement that it will shed 6 per cent of its workforce, including chief content officer Dawn Ostroff, who has been responsible for some of the unsustainable deals struck with podcasters such as Dax Shepard (US$50 million for three years) and Joe Rogan (US$200 million for three years).

CEO Daniel Ek said, “in hindsight, I was too ambitious in investing ahead of our revenue growth.”

 

 



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