Spotify, the music streaming giant, has declared record profits exceeding €1 billion (£860 million) following a year of cost reductions and staff layoffs. Despite continuous growth in its user base and offerings such as podcasts and audiobooks, its quarterly gross profit suffered due to falling short of its projected monthly active users. To address this, the Swedish company implemented a 17% reduction in its workforce last year, aiming to control expenses.
CEO Daniel Ek, in December, announced the elimination of about 1,500 jobs as part of significant efforts to streamline costs and achieve company objectives. Despite these measures, Spotify remains committed to expanding globally and reaching a billion users by 2030. Recently, it announced a renewed focus on this mission, investing resources to attract new audiences.
“We are going to add back some marketing spend over the year,” Mr Ek said. “Because we want to keep on having the growth and we saw that in some territories, we may have pulled back a little bit too much.”
Spotify’s podcast business accounted for a large portion of company earnings. Gross margins increased from 25.2% a year earlier to 27.6% throughout the quarter. In order to expand its podcast business, it spent more than a billion euros, hundreds of millions of euros on well-known programs like “The Joe Rogan Experience”.
“It [podcasting] was a drag last year. Now it is another profit centre for us,” Mr Ek said.
The company experienced a 20% increase in quarterly revenue, reaching €3.64 billion, surpassing estimates of €3.61 billion. To bolster revenue, Spotify implemented price hikes and tested various subscription plans. The streaming service also introduced a music-only tier catering to consumers solely interested in music, as mentioned by the company’s CEO. While Spotify’s current user count stands at 615 million, slightly below its projected 618 million for the quarter, it aims to achieve 631 million by mid-year.
However, premium subscriber numbers rose by 14% in the first quarter to 239 million, aligning with forecasts. Initially dropping on the quarterly results, Spotify shares rebounded, surging 8% in premarket trading on Tuesday. Since its inception in 2006, Spotify has made significant investments in expanding its business and securing exclusive content. Notable podcasts, including those created by Michelle and Barack Obama, as well as the Duke and Duchess of Sussex, have been featured on the platform.
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