It's been almost seven weeks since Spotify announced the "biggest change since the launch of the mobile version" with the new "home feed", which is somewhat reminiscent of Tiktok, as Daniel Ek solemnly explained. This Tuesday, the music streaming market leader presented the figures for the first quarter of this year – and they are mixed.
Benjamin Fischer
Editor in business.
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Thus, at the end of March, the Swedish service had 515 million monthly users and 210 million subscribers. This corresponds to an increase of 26 percent or 5 million compared to the fourth quarter of 2022. Both values were thus above the previously given, rather conservative forecast of 500 million users and 207 million subscribers. Compared to the first quarter of last year, sales grew by 14 percent to 3.04 billion euros, slightly weaker than expected. Spotify had forecast 3.1 billion euros.
However, the gross margin of 25.2 percent was better than forecast (24.9 percent). This also applies to the operating loss of 156 million euros (194 million euros). The bottom line was a loss of 225 million euros after a significant increase (131 million) in the previous year. Spotify had closed the full year 2022 with a loss of 430 million euros. For the coming quarter, the company now expects to grow to 530 million monthly active users and 217 million subscribers. Sales are expected to increase to 3.2 billion euros, with an operating loss of 129 million euros. The share was up around 6 percent in pre-market trading.
"If the timing is right, we will raise prices"
As a result, 41 million euros in severance payments were also reflected. In the forecast, these had been estimated at 35 to 45 million euros. Spotify, like other tech companies before it, had announced in January that it would cut six percent of jobs after the company created more than 1000 new jobs during the pandemic. In addition, Dawn Ostroff, the manager responsible for the podcast business, left. Spotify boss Ek had declared in the course of the step that from now on more attention would be paid to efficiency.
Sales are expected to grow faster than operating expenses again in the course of this year, it said at the presentation of the annual figures for 2022. In the first quarter, they rose by 36 percent, which was once again significantly stronger than in the same quarter of the previous year. Speaking to investors after the figures were presented, Ek said that the measures for greater efficiency should become clearer in the course of the year. Regarding expiring or new exclusive deals with podcasters, Ek said that they would look very closely at the performance of podcasts that are already running and not overpay for deals.
There have also been austerity measures on another side recently: At the beginning of April, the end of the live audio app was announced. A short time later, less than a year after the takeover, the Swedish company also announced that it would discontinue the music quiz game Heardle.
With regard to the slightly lower than expected revenue, Spotify pointed to the currently more difficult advertising environment. Before the outbreak of the Ukraine war, Spotify had recorded 30 percent growth in this area. Advertising revenues have now risen by 17 percent compared to the same period last year. In general, however, they are satisfied with their current position in the advertising market.