Spotify boss admits he got a ‘little carried away’ on podcast spending binge
Spotify boss admits he got a ‘little carried away’ on podcast spending binge after splurging $18m on three-year Harry and Meghan deal that led to Archetypes and one Christmas special and $200m on Joe Rogan
- Daniel Ek said in a call with analysts that ‘with hindsight… I over-invested’
- But by far its biggest deal was with the American podcast star Joe Rogan
The CEO of Spotify today admitted he got a ‘little carried away’ after a splurge of expensive podcast deals drove the streaming service to a $230million (£187m) loss.
Daniel Ek said ‘with hindsight… I over-invested’ after telling analysts the firm’s profitability had been hit by large investments in new content in addition to a major hiring spree.
The Swedish firm has spent a fortune on podcasts in recent years, including an estimated $18million (£15m) three-year deal with the Duke and Duchess of Sussex. Meghan’s podcast, Archetypes, aired last year, while Harry appeared in a ‘holiday special’.
But by far its biggest deal was with US podcast star Joe Rogan, who was paid an estimated $200m (£162m) as part of an exclusive multi-year deal in 2020.
The Swedish firm has spent a fortune on podcasts in recent years, including an estimated $18million (£15m) three-year deal with the Duke and Duchess of Sussex
The company has invested more than $1billion (£812m) in building out its podcast business which currently has more than four million titles.
But those investments have hit gross margins.
In addition, Mr Ek said the ‘macro environment’ had changed dramatically over the course of last year, setting the stage for belt-tightening.
‘In hindsight, I probably got a little carried away and over-invested relative to the uncertainty we saw shaping up in the market,’ he said.
Spotify invested heavily in building up its podcast and audiobooks business in 2022, with operating expenses growing at twice the speed of its revenue.
That set the stage for Spotify to lay off 600 employees this month and trim other costs.
The company said it expected gross margins to improve throughout the year, with the increased focus on efficiency and forecasts of growth in monthly active users.
By far its biggest deal was with US podcast star Joe Rogan, who was paid an estimated $200m (£162m) as part of an exclusive multi-year deal in 2020
Spotify projected the number of listeners would reach 500 million in the current quarter.
‘We always knew that 2022 would be an investment year and 2023 will be a year where we would slow down the investments and thereby operating expenditure while revenue keeps on climbing,’ Chief Financial Officer Paul Vogel said.
The number of monthly active users rose to 489m in the quarter, beating Spotify’s guidance and analysts’ forecasts of 477.9m, helped by marketing campaigns and growth in India and Indonesia.
Premium subscribers, who account for most of the company’s revenue, increased 14 per cent to 205m, topping estimates of 202.3m, according to IBES data from Refinitiv.
Apart from the forecast of half a billion users, Spotify also expects premium subscribers to reach 207m in the current quarter and revenue of $3.35bn (£2.7bn).
Mr Ek told investors he expects to see improvements as podcasting grows and attracts more advertising revenue, and the company invests in a more targeted way.
Spotify projected the number of listeners would reach 500 million in the current quarter
In autumn, Spotify canceled 11 original podcasts from Parcast and Gimlet, two studios the company acquired in 2019, shifting focus to original and exclusive shows that attract listeners, such as Warner Bros’ ‘Batman Unburied,’ or the thriller ‘Caso 63.’
Dawn Ostroff, the head of content and advertising who helped shape Spotify’s podcast business, was also leaving the company after four years.
‘Spotify will double down on things that worked well and stop doing the things that don’t work,’ Ek told Reuters. ‘We are a lot more focused on efficiency.’
In 2023, the company expects revenue to begin to grow faster than operating expenses, which have jumped due to headcount growth and higher advertising costs.