Spotify reports jump in listeners, ad revenue

The streaming service saw a surge in listeners and ad revenue despite the controversy over its star podcaster. CEO Daniel Ek says a number of lessons have been learned.

Joe Rogan has been called out by music legends Neil Young and Joni Mitchell for spreading Covid-19 disinformation on the streaming service. Picture: Carmen Mandato / GETTY IMAGES NORTH AMERICA / AFP

Spotify added more users and saw a surge in advertising revenue in its recently completed quarter as its podcast strategy takes hold despite backlash to its star host.

Neil Young last week removed his music from Spotify in protest to what he says is vaccine misinformation spread by podcaster Joe Rogan on the streaming service. The company has since made public its content policy and said it would begin to tag Covid-19-related content with an advisory prompting users to check out the service’s new hub for data-driven facts and up-to-date information from the health and scientific communities.

On Spotify’s earnings call Wednesday, Chief Executive Daniel Ek called it a very complicated issue and said Mr Rogan, like other creators on the company’s platform, has to abide by its content policies. He added that it was too early to tell if the controversy was having an impact on subscribers.

“There’s no doubt that the last several weeks have presented a number of learning opportunities,” Mr Ek said on the call. “We believe we have a critical role to play in supporting creator expression while balancing it with the safety of our users.” For the fourth quarter, Spotify reported 406 million monthly active users, up 18 per cent from a year earlier and at the high end of the company’s guidance. Paying subscribers, its most lucrative type of customer, rose 16 per cent to 180 million, also at the top of the company’s expectations.

Spotify shares – down 44 per cent over the past year to $US191.92 – fell another 11 per cent in after-hours trading as the company said it wouldn’t provide annual guidance. On the company’s earnings call, Spotify financial chief Paul Vogel said that while the company wasn’t providing such guidance, it didn’t anticipate any material change this year in its user-growth trajectory.

Spotify’s outlook for the current quarter was roughly in line with analysts’ views.

Average revenue per user for the subscription business in the recently completed quarter climbed 3 per cent to 4.40 euros. The increase marks the second quarter of a turnaround for the metric, which had been pressured downward for years as the company attracted new subscribers through discounted plans and lower prices in newer markets. A little over a year ago, Spotify began raising the price of its family plan in dozens of markets, including the US which has helped increase revenue on a peruser basis.

Revenue from subscriptions climbed 22 per cent to 2.295 billion euros, equivalent to roughly $US2.6 billion. Advertising revenue shot up 40 per cent to 394 million euros. Advertising, which typically has accounted for around 10 per cent of overall revenue, has become a particular growth area as Spotify expands its podcast business. During the quarter, advertising made up about 15 per cent of total revenue.

Spotify said it has 3.6 million podcasts available on its service, up from 3.2 million in the previous quarter.

Mr Young’s protest against Spotify has attracted other musicians, including David Crosby and Stephen Stills on Wednesday. The actions come as Mr Rogan has apologised and pledged to be more balanced and informed about controversial topics and guests.

Mr Rogan has used his popular Spotify show to discuss Covid-19 vaccines and restrictions, speaking against vaccine mandates for indoor events and suggesting that young, healthy people shouldn’t be vaccinated.

In all for the quarter ended December 31, Spotify’s revenue rose 24 per cent to 2.69 billion euros, above the company’s expectations.

Spotify reported a narrower loss of 39 million euros from a loss of 125 million euros a year earlier. Per share, the company posted a loss of 21 European cents, compared with a year-earlier loss of 66 European cents. While the company has periodically reported a quarterly profit, executives have said it would continue to give priority to growth – attracting new subscribers and investing in podcasting.

Free cash flow, a measure of the cash a company generates from operations, and viewed by many investors as a proxy for performance, was 103 million euros, up from 74 million euros a year earlier and 99 million euros in the previous quarter.

For the current first quarter, the company said it expects monthly active users of 418 million, premium subscribers of 183 million and revenue of 2.6 billion euros. Analysts, on average, were expecting 418.2 million monthly active users, 184 million premium subscribers and 2.6 billion euros in revenue, according to FactSet.

News Corp’s Dow Jones & Co., publisher of The Wall Street Journal, has a content partnership with Spotify’s Gimlet Media unit.
The Wall Street Journal