“In hindsight, I got a little carried away and over-invested relative to the uncertainty I saw in the market,” Spotify CEO Daniel Ek said this morning as the company reported a jump in users but wider losses, a week after announcing a reorganization of top management and hundreds of layoffs.
The music streaming giant announced 489 million monthly active users in the fourth quarter of 2022 (up 20%, its largest ever quarterly bump), with 205 premium subscribers (up 14%). Both numbers beat forecasts. However, losses widened on investments in podcasting and other costs.
Spotify last week laid off about 600 staffers amid a shuffle at the top that saw Dawn Ostroff exit as chief content officer and advertising business officer. The exec, a former president of entertainment at The CW, and Condé Nast Entertainment had been a key architect of Spotify’s strategy around podcasts, which have grown rapidly to about 5 million on the service, led by deals for The Joe Rogan Experience and Call Her Daddy. A series of acquisitions expanded the business but at a cost.
Spotify execs promised that 2022 was the year of peak losses in the business.
With Ostroff’s exit, strategy is now consolidated under co-presidents Alex Norstrom and Gustav Söderström. Asked about the C-Suite changes, Ek claimed that the primary goal is faster decision making and a move away from growth “at all costs.”
“From a strategy point of view” it won’t “differ that much. “The primary reason we did this reorganization was to drive speed and more efficiency…Spotify is a lot more complex business, so to have Gustav and Alex help me in the day-to-day means… we can make decisions faster,” he said. “Marketing was under Alex, but not advertising, and not content. And now we are looking at it as one P&L across the board.”
“Podcasting has been a drag on the gross margin side,” said Ek. “Some investments worked out, some haven’t. Some shows worked, some didn’t perform as we expected. And that is a sign of maturing. You go for growth first and then you seek efficiency. But, generally, you will see us focus on efficiency…not just growth at all costs.”
Spotify’s revenue of 3.2 billion euros (about $3.47 billion) in the fourth quarter was up 18% year-on-year, excluding foreign exchange fluctuations. Without FX, it was €3.17 billion.
Losses widened to 231 million euros (around $250 million) or €1.40 a share.
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