Spotify hits by costs of unwinding aggressive Podcast Push

Spotify suffered a €302mn quarterly loss as it incurred costs by deleting podcasts and laying off employees, obscuring the record number new users that signed up in the quarter.

Spotify, which invested heavily during the Coronavirus Pandemic to push podcasts, has been regressing over the last year due to investors becoming impatient.

The company disclosed the cost of retreat on Tuesday. It said it had incurred €91mn in expenses “related” to efficiency efforts, such as real property impairments and paying out severance pay to employees that it had terminated.

The loss was €302mn for the three-month period ending in June. This is more than twice the €125mn that it had lost during the same time last year. The group’s revenue increased by 11 percent to €3.2bn compared with a year earlier.

Spotify cancelled several of its original podcasts over the last year, including a few true crime series in the third quarter as it merged the Gimlet studio and Parcast.

Spotify’s revenue dropped during the third quarter but the company gained 10mn subscribers who paid for the service and 36mn total users. Spotify has now been signed up by more than half a million people, or 551mn worldwide.

Spotify’s robust growth indicates that the slowdown in subscriber numbers revealed by Netflix which caused a brutal correction of US media stocks has not occurred.

The shares of Spotify fell by more than 14 percent on Tuesday in New York.

Shareholders continue to pressure it to cut costs. ValueAct, an activist investor, purchased a stake of Spotify in February . It argued that the costs had “exploded” at Spotify as it expanded its podcast business.

Chief financial officer Paul Vogelsaid this year that podcasts would be a “big drag” on the business by 2022 and that, “whenthings aren’t going well, we’ll be quicker to pull out the plug.”

On Monday, the group announced that it would be raising its prices in several countries including the US and UK. Spotify’s standard subscription in the US will cost $11 instead of $10, the first increase since the company launched there more than 10 years ago. Apple Music raised its subscription price to $11 last year, after the move by Spotify.

Spotify’s website explained that the increase in price was to “help the company keep innovating” in the changing market conditions.

Post Disclaimer

The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.

This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.

The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.