Spotify Achieved Strong Subscriber Growth Despite Price Increases. Thanks to Higher Cost Discipline and Increased Advertising Revenue, the Audio-Streaming Giant was Able to Reduce its Losses in the Fourth Quarter of 2023.
The Company is Working to Become Permanently Profitable, Among Other Things Through an Adjusted Investment Strategy in the Podcast Sector, Price Increases, and a Reduction of the Workforce. In December, 17% or About 1,500 Employees were Laid Off.
In the last quarter, Spotify's loss decreased to 70 million euros, approximately 75 million US dollars, from 270 million euros in the same period last year. Revenue grew by 16% to 3.67 billion euros, in line with forecasts.
This was facilitated by price increases in the second half of 2023 and a growing advertising business. Spotify's largest source of revenue, subscriber revenue, increased by 17% to 3.17 billion euros. Advertising revenue climbed to a record 501 million euros due to double-digit growth in the music and podcast sectors.
According to the company, this is related to the extension of the licensing agreement with star podcaster Joe Rogan, which the Wall Street Journal had already reported on last month. The deal is valued at up to 250 million US dollars. Under the new agreement, Spotify will sell advertising for "The Joe Rogan Experience" and distribute it across various podcast platforms, including a video version on YouTube, rather than demanding exclusivity.
Moreover, the company is working on revising its agreements with other leading podcasters to pay them lower minimum guarantees and emphasize revenue sharing. News Corp's Dow Jones & Co., publisher of The Wall Street Journal, has a content partnership with Spotify's Gimlet Media unit.
In the fourth quarter, Spotify's subscriber growth continued its positive trend. The number of paid subscribers – the company's most lucrative customer base – increased by 15% to 236 million, exceeding expectations. Growth in paid subscribers was strong across all regions, especially in Latin America and outside Europe and North America.
At the end of the year, Spotify counted a total of 602 million monthly active users, which corresponds to a 23% increase compared to the previous year. The company expects the number of monthly active users to rise to 618 million in the first quarter, and the number of paid subscribers to increase to 239 million.
Spotify was also able to make progress with the average revenue per user. This metric had come under pressure in recent years due to discount promotions for new subscribers and lower prices in emerging markets.
The average revenue per user in the subscription business increased by 1% year-over-year thanks to price hikes, or by 5% on a constant currency basis, to 4.60 euros.
Despite Rising Subscription Prices, Spotify Continues to Grow Successfully and Persistently Works on Improving Its Profitability.
The Extension of the Licensing Agreement with Top Podcaster Joe Rogan, as Well as Efforts to Revamp Relationships with Other Leading Podcasters, Contribute to Strong Growth in Advertising Business.
With a steady increase in subscriber numbers and improved revenue performance, Spotify can look to the future with optimism.
