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Spotify is putting emerging U.S. songwriters under the RADAR.
The streaming giant this week launches RADAR Songwriter in the United States, its development program which promises a leg-up for its songwriter participants.
Grammy Award-winning songwriting and production team Beach Noise is the first U.S. act to join the program, which is activated following a soft launch last year in several international territories.
Hailing from Stockton and Los Angeles, Beach Noise is the trio of Matt Schaeffer, Johnny Kosich, and Jake Kosich. The creative team has worked with the likes of Kendrick Lamar, Bakar and Baby Keem, and is credited with producing and writing six of the tracks on Lamar’s Mr. Morale & The Big Steppers, which bowed at No. 1 on the Billboard 200 chart in 2022. One of those numbers was “The Heart Part 5,” which collected a brace of rap categories at the 2023 Grammy Awards.
Beach Noise and other songwriters selected for RADAR Songwriters should benefit from a raft of spotlights and promotional pushes across Spotify’s considerable network.
Those selected will appear on a bespoke cover of the RADAR Songwriters playlist (and their recent releases are added to the playlist); they’re featured in both local and global Spotify creative marketing campaigns; participants will receive promotion on Notable, Spotify’s home for songwriters and producers, by way of a dedicated blog post or interview and social support to amplify the news; and their recent releases will be included on the Noteable Releases Playlist.
Also, explains a rep for Spotify, songwriters tapped for the campaign will receive a dedicated “Written By” playlist that will should earn prominent placement in global spots featuring emerging talent such as RADAR and the Songwriters Hub.
Previous international rising talents celebrated by the program include Natali Noor (Sweden), Alessandro La Cava (Italy), Nathan Galante (Mexico), and Chiiild (Canada).
Spotify unveiled RADAR in March 2020, its global emerging artist program that unites the streaming service’s various domestic and international programs under a single name.
Through the pandemic, Spotify’s numbers continued to grow. According to its earning report published earlier this year, the Sweden-based business ended 2022 with 205 million paid subscribers, up 5% from 195 million in Q3. At the same time, Spotify’s total monthly active users (MAUs) reached 489 million, up 7% from 456 million in Q3.
The Weeknd reached a new high-water mark on Spotify this week.
“It’s official: On February 27, The Weeknd became the first artist in Spotify History to reach 100 Million monthly listeners,” the streaming service announced Monday (Feb. 27) via its official social media accounts on Twitter and Instagram.
For context on just how impressive 100 million monthly listeners is, other supernovas currently trail the artist otherwise known as Abel Tesfaye by tens of millions. As of press time, Drake sits at 68.6 million, Taylor Swift is garnering 80.3 million and even with the record-breaking success of current Billboard Hot 100 No. 1 hit “Flowers,” Miley Cyrus has 82.5 million.
The Weeknd’s latest streaming accomplishment comes just a few days after he dropped his new remix of “Die for You” with Ariana Grande. The duet version of the Starboy-era hit is the frequent collaborators’ fourth team-up following “Love Me Harder” (from 2014’s My Everything), “Off the Table” (from 2020’s Positions) and the pair’s 2021 remix of “Save Your Tears” (from After Hours).
Over the weekend, The Weeknd: Live at SoFi Stadium — the Canadian crooner’s new concert special filmed during last year’s After Hours ‘Til Dawn Tour — premiered on HBO Max. Earlier this month, he confirmed that the musical documentary would close out his album cycle for 2022’s Dawn FM, tweeting, “HBO concert will be the last piece of Dawn FM. I can see the horizon.”
Meanwhile, Tesfaye’s upcoming HBO drama The Idol, which he created with Euphoria visionary Sam Levinson and Reza Fahim, is set to premiere some time later this year co-starring Lily-Rose Depp, Troye Sivan, BLACKPINK’s Jennie and more.
Check out Spotify’s announcement of The Weeknd’s latest achievement below.
Max Cutler, Spotify‘s head of audio talk shows and partnerships, is departing to “return to his entrepreneurial roots,” according to the company. His exit is part of a broader reorganization at the streaming company’s podcast division, where Julie McNamara has been appointed to lead licensed exclusives in addition to her oversight of Spotify’s global podcast studios. Additionally, Bryan Thoensen will continue overseeing content partnerships for third-party creators while expanding both those efforts and his team, while Bill Simmons will now report to podcasting head Sahar Elhabashi; in addition to continuing to lead The Ringer, Simmons will partner with vp/global head of ads business & platform Lee Brown on podcast monetization across the Spotify portfolio. No layoffs are connected to these shifts, according to the company.
Stacey Tang and Glyn Aikins were named co-presidents of RCA UK; both have worked at the label since 2018, with Tang most recently serving as executive vp while Aikins was co-president of Sony Music’s Since 93, a label partnership with RCA. Tang was named to Billboard‘s International Power Players list last year.
Robin Godfrey-Cass joined Primary Wave Music to focus on catalog acquisitions for the publishing giant. Godfrey Cass has over 40 years of experience in the music industry, including as managing director at Warner/Chappell Music UK and Round Hill Carlin UK; founder of Crosstown Songs; and co-founder of Perfect Storm, which eventually sold to Reservoir.
Cathy Bauer was appointed to the newly created role of head of physical sales & marketing at ADA Worldwide. In the role, she will manage ADA’s global physical sales and marketing division “with a focus on growing partners’ businesses and establishing efficient and standardized processes,” according to a press release. Bauer will additionally be tasked with identifying growth and innovation opportunities for ADA’s artists and partners, including through direct-to-consumer initiatives. She reports to ADA Worldwide president Cat Kreidich. Bauer joins ADA from ABKCO Music & Records, where she served as vp of sales & marketing for nearly five years.
Concord promoted 12 staff members to vp and senior vp roles across multiple business areas: Carol Boldish to vp of production, Concord Label Group (Nashville); Tom Frank to vp of sync marketing, Concord Label Group (London); David Geer to vp of music & publications, Concord Theatricals (New York); Shane Guitar to vp of operations, Fearless Records (Los Angeles); Randy Linsey to vp of international marketing & sales, Craft Recordings (Los Angeles); Clare Maxwell to vp of marketing, Concord Label Group (London); Elysha Miracle to senior vp of rights data management (Nashville); Meredith O’Leary to vp of sync marketing, Concord Label Group (New York); Gary Paczosa to senior vp of A&R, Rounder Records (Nashville); Stephen Phillips to vp of sync, Concord Music Publishing (London); Kelly Voigt to senior vp of corporate communications (Nashville); and Marty Willard to senior vp of business & legal affairs (remote).
Parlophone Records announced several key promotions and hires, chiefly Jack Melhuish, who has been named GM. He will continue to oversee and develop campaigns for Parlophone’s roster while also taking on wider responsibilities at the label. Additionally, Arina Logacheva, Molly McNulty and Seb Smith have been hired as senior A&R managers while Jason Ngimbi was hired as junior A&R manager. Logacheva joins from Universal Music, McNulty comes from Kobalt Music Publishing, Smith comes from Believe Music and Ngimbi joins from BMG. Lastly, Grace O’Neill was promoted to head of radio while Sam Palm was promoted to head of the newly created insight department, where he will extend the work he’s been doing as streaming head by incorporating more robust audience data.
Marcus Wise was appointed CEO for the European region at Wise Music Group. Previously global head of media, the London-based executive will lead the company’s music publishing and recorded music interests across the continent. Additionally, Dave Holley was named Wise Music Group COO, also based in London.
Alexander Brose, former executive director and CEO of The Tianjin Juilliard School in China, will succeed Dr. Peter Simon as president/CEO of The Royal Conservatory of Music upon Simon’s retirement on Aug. 31, 2024. The transition will begin on Sept. 1, 2023, when Brose will assume the role of president designate and work closely alongside Simon leading up to his departure.
Allison Smith was promoted to vp of promotion at Big Machine/John Varvatos Records; she was previously national director of promotion. In her new role, Smith will continue cultivating relationships between rock radio and the Varvatos imprint’s roster, which includes Badflower, Ayron Jones, Starcrawler, The Struts and Violet Saturn. She can be reached at allison.smith@bmlg.net.
Samantha Steel was named COO at Triple 8 Management, where she will oversee operations, promote a positive company culture and vision and develop solutions for internal communications as well as growth potential for employees and clients. Steel first joined Triple 8 in 2017, when Good Time Inc., where she served as GM, was acquired by the company. She can be reached at Sam@Triple8Mgmt.com.
JukeJoint Foundation, a nonprofit designed to empower women of color in the music business, was launched by Fresh ‘N Sassy Productions and ENCORE Music Tech Solutions founder Janishia Jones out of Los Angeles. Current board members include Live Out L!ve CEO Candace Newman, Exceleration Music head of data strategy Britnee Foreman, Jammcard operations manager Katrina Lee and Mass Appeal head of finance Daphnee Pierre. The Foundation will help women of color forge key professional connections by providing access to music industry events, scholarships to assist in repaying student loan debt and grants to aid the launch of their own music businesses. It plans to open additional chapters in New York, Atlanta and Nashville.
Gail Berger was named senior vp and GM of automotive partnerships at SiriusXM, succeeding Rodney Pickett, who will retire at the end of the month. Reporting to chief commercial officer Joe Verbrugge, Berger will oversee the company’s automotive partnerships, automotive remarketing and automotive field operations teams responsible for growing SiriusXM’s presence in new and used vehicles. Berger, who has been with SiriusXM since 2012, was most recently senior vp of automotive remarketing.
Bryce Sherlow was promoted to A&R manager at Warner Chappell Music in Nashville, while Benji Amaefule was hired in the same role. Amaefule joins from media platform Country Central, where he served as head of artist and label partnerships; he also interviews Nashville artists and writers and reviews new music via his brand TheBenjiChord.
Drive Agency president/CEO Jessy Tolkan was appointed as chairperson of the board of directors at HeadCount, the nonpartisan, nonprofit voter registration organization that harnesses music, culture and digital media to increase voter turnout. She succeeds Peter Shapiro, who recently finished out his four-year term as chair but will keep a seat on the board.
Mary Beth O’Toole launched The Conduit Collaborative, a boutique public relations firm with locations in Los Angeles and Sacramento, Calif. The firm specializes in finding non-traditional pitch angles for clients, ranging from music artists to Washington lobbying firms. It offers a range of PR services, including tour press and red carpet services, and has already worked with the Janis Joplin estate, Universal Music and L.A. Live, among other clients. O’Toole can be reached at info@conduitcollab.com.
Sound Future Foundation, which harnesses the influence of the live event industry to further climate innovation, announced its new board of directors, including board chair Terah Lyons, who previously served as policy advisor to U.S. chief technology officer Megan Smith in President Obama’s Office of Science and Technology Policy and founding executive director of the global nonprofit Partnership on AI. The remainder of the new board includes treasurer Kelci Zile (sustainability partner, Madrona Ventura Labs); secretary Adam Brunner (senior planner & counsel, Wildstar Partners); Brandy Schultz (co-founder/chief marketing officer, Sound Future and founder of Adventure Nannies); Ashley O’Winter (co-founder/COO, Sound Future); Wesley Schultz (songwriter-producer-lead singer of The Lumineers); Sara Full (tour manager); Joe Atamian (senior vp, Wasserman Music); and Alex Bruford (founder/CEO/agent, ATC Live).
ASM Global appointed Leonie Patrick of the San Francisco Travel Association as GM for its San Francisco convention center the Moscone Center. “Her focus will be to actively create an international destination while driving a great value for live meetings and events that drive action within their communities,” said ASM Global executive vp of convention centers Dan Hoffend in a statement.
TAIT — a global group of designers, fabricators, engineers and innovators for live and location-based experiences — promoted Gemma Hodgson to chief commercial officer. Additionally, Jess Chalifoux has joined the company as vp of global business development. Chalifoux reports to Hodgson, who can be reached at gemma.guy@taittowers.com.
Sander Shalinsky was named legal counsel at SRG/ILS Group. In music, Shalinsky is best known for his work with The Weeknd and producer Bob Ezrin, among many other record labels, artists, publishers, managers and music executives.
Singer-songwriter Jewel co-founded Innerworld, a mental health platform that aims to “build the largest community in the metaverse for mental health support,” according to a press release. Jewel will serve as chief strategy officer, while founder Noah Robinson will serve as CEO.
CrossBorderWorks founder/CEO Vickie Nauman joined the advisory board of Web3 company Pixelynx, which develops new formats of music and experiences for the metaverse.
Spotify is experimenting with “token-enabled playlists,” meaning users in possession of non-fungible tokens (NFTs) can connect their wallets and listen to collections of music put together by the likes of Overlord (a company developing blockchain-based games) and KINGSHIP (Universal Music Group’s Bored Ape band). Android users in the United States, United Kingdom, Germany, Australia and New Zealand can now test the new feature.
“At Spotify, we routinely conduct a number of tests in an effort to improve our user experience,” a spokesperson for the streaming platform said in a statement. “Some of those end up paving the path for our broader user experience and others serve only as important learnings. We have no further news to share on future plans at this time.”
Spotify CEO Daniel Ek discussed blockchain technology — which enables the creation of unique digital files that are also uncopyable — on the Culture: Now Streaming podcast in 2019. “The most important thing is it will enable paying for things digitally in many of the places around the world where those kind of methods just doesn’t exist,” Ek said. “A service like Spotify, you can imagine what would happen by allowing users for instance to be able to pay artists directly. That can open up massive opportunities where all of a sudden, a user in Japan might pay a creator in Argentina. And that opens up huge opportunities for how we can further our mission.”
Last year, Spotify started allowing “a small group of artists [to] promote their existing third-party NFT offerings via their artist profiles,” according to a statement from the company. (At the time, Spotify reiterated that it “routinely conduct[s] a number of tests in an effort to improve artist and fan experiences” some of which “serve only as an important learning.”)
Steve Aoki and The Wombats were among those testing the feature, which was made available to Android users in the U.S.
Spotify announced a new listening feature that incorporates artificial intelligence technology on Wednesday (Feb. 22). Instead of clicking through an editorial playlist like Today’s Top Hits or an algorithmic one like Discovery Weekly, premium users in the U.S. and Canada can now turn to “DJ,” which supplements algorithmic recommendations with commentary about the selections delivered via an AI voice platform.
DJ “will sort through the latest music and look back at some of your old favorites — maybe even resurfacing that song you haven’t listened to for years,” Spotify wrote in a blog post. “It will then review what you might enjoy and deliver a stream of songs picked just for you. And what’s more, it constantly refreshes the lineup based on your feedback. If you’re not feeling the vibe, just tap the DJ button and it will switch it up.”
Sulinna Ong, Global Head of Editorial at Spotify, praised DJ as “a new and unique music experience” in a statement. “I’m personally so excited about DJ because we’re able to harness this power to tell an artist’s story, to be able to provide context around their work and their songs in a broader cultural arena like never before,” she added.
Spotify’s blog post also noted that “early tests” of DJ — the feature is still in beta mode — indicate “that when listeners hear that additional audio context alongside their music recommendations, they’re more willing to try something new and listen to a song they may have otherwise skipped.”
The streaming service said that technology from OpenAI, the company that also developed ChatGPT, helps furnish “insightful facts about the music, artists, or genres you’re listening to” — facts sourced in part from Spotify’s editorial team. The AI voice of DJ is based on that of Xavier “X” Jernigan, the platform’s head of cultural partnerships, who previously hosted a morning show podcast for the streaming service. Spotify announced that it acquired Sonantic, an AI voice platform, last June.
Generative artificial intelligence has become a red-hot topic in tech in recent months thanks to ChatGPT and new image generators like DALL-E 2. AI is already being incorporated by tech companies like BandLab and Boomy, which aim to make the barrier to artistic creation lower by providing aspiring acts access to AI-powered music-making tools.
ValueAct Capital Management, a hedge fund with a history of being an activist investor, now holds a stake in Spotify. Mason Morfit, the San Francisco-based company’s chief executive officer and chief investment officer, revealed the firm’s ownership in Spotify shares at an event at Columbia University on Friday (Feb. 10), according to reports.
Spotify shares rose 3.6% to $125.16 on Friday following the news.
ValueAct, which did not reveal the timing of the investment, enters the picture as Spotify appears determined to improve its margins and reign in costs. Two weeks ago, Spotify announced a reorganization and layoff of 6% of its staff. Chief content officer Dawn Ostroff, who used lucrative licensing and original content deals to build Spotify’s podcast business, departed the company. The New York-based executive’s duties were absorbed by chief business officer Alex Norström out of Spotify’s Swedish headquarters. In the fourth quarter, Spotify showed a willingness to pare costs by laying off staff in its original podcasts and some of its live programming.
“During the boom, it applied these powers to new markets like podcasts, audiobooks and live chat rooms,” ValueAct’s Morfit said according to The Financial Times. “Its operating expenses and funding for content exploded. It is now sorting out what was built to last and what was built for the bubble.”
ValueAct owns shares in dozens of companies including Twenty-First Century Fox, Nintendo, The New York Times Company, Microsoft and Adobe Systems.
Exactly what this means for Spotify’s decision-making isn’t immediately clear. Like Meta, Alphabet and some other prominent tech companies, Spotify has a dual-class share system that grants its founders with enough voting power to control corporate governance. In a single-class structure, shareholders’ voting power is proportional to the number of shares they own. In a dual-class system, ordinary shares have far less voting power than a second type of shares.
Spotify’s co-founders own only 38% of outstanding common shares but own 100% of the company’s “beneficiary certificates,” each of which has 10 times the voting power of an ordinary share but no economic rights. The arrangement gives CEO Daniel Ek and co-founder Martin Lorentzon 74.3% of voting power, according to Spotify’s 2022 annual report, and ensures the duo can choose the board of directors despite owning a minority of the company’s economic interest.
As of Dec. 31, 2022, Ek has 16.5% of outstanding common shares and 31.7% of total voting power while Lorentzon owns 11.1% of ordinary shares and 42.6% of total voting power. The next-largest shareholder, Baille Gifford & Co, owns 14.5% of ordinary shares and 5.1% of voting power. Chinese tech giant Tencent Holdings owns 8.6% of ordinary shares, but Ek exercises those shares’ voting rights.
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Spotify finished 2022 with more than 100 million tracks in its catalog, according to the company’s annual report filed Thursday (Feb. 2). That’s 18 million more than the 82 million tracks streaming service had the year prior — which averages to about 49,000 new songs per day.
By most measures, 49,000 tracks a day is a huge amount of music. At three minutes per track, it would take about three and a half months to listen to a single day’s worth of new music from start to finish.
But 49,000 is only half the number that’s been cited in recent months. Universal Music Group chairman and CEO Lucian Grainge said in September 2022 that 100,000 tracks were being “added to music platforms every day.” Earlier that month, former Warner Music Group CEO Stephen Cooper said “roughly 100,000” tracks were uploaded “to SoundCloud, Spotify, Apple” and other platforms “on any given day of the week.”
Not that self-reported numbers have always been in sync with executives’ statements. In April 2019, Spotify CEO Daniel Ek said “nearly 40,000” new tracks were being uploaded daily. Based on Spotify’s own disclosures, however, the daily average that year was 27,000. In Feb. 2021, Ek said the number of daily tracks added to its catalog had surpassed 60,000. Spotify’s disclosures showed the daily average was 55,000 in 2020 — perhaps a function of artists staying home during the early days of the pandemic — but fell to 33,000 in 2021.
But there certainly could be 100,000 new tracks uploaded daily in aggregate. There’s more music on the internet than Spotify adds to its catalog. SoundCloud, for example, adds tracks at a faster rate than other platforms because it licenses music from record labels and distributors while also accepting direct uploads from independent musicians. The service currently boasts 40 million artists on the platform who are unlikely to be found elsewhere. When I wrote about the size of music catalogs in April 2022, SoundCloud had added 50 million tracks in about 12 months, or about 137,000 per day. It appears to have largely maintained that growth rate. From Feb. 2022 through Jan. 2023, SoundCloud added 45 million tracks — an average of 123,000 per day — according to numbers found in the company’s press releases.
Whether the number of new tracks being uploaded daily is 49,000 (17.9 million annually) or 100,000 (36.5 million annually) matters. Anybody following trends, making forecasts or deciding on M&A strategies should understand the size of the market and where the opportunities lay. The lower number is the amount of music landing on the world’s most popular audio streaming platform. The higher number better represents the size of what’s called “the creator economy,” or the universe of music being produced by novices, professionals and everybody in between.
The future of music is more music. People will still flock to chart-topping artists and congregate around a small number of superstars. But the barriers to entry are now so low that virtually anybody can commercially release music, and music streaming services increasingly serve every music niche in existence. The music creator tools market was worth $4.1 billion in 2022, according to MIDiA Research, and MIDiA forecast that the number of people paying for music software, skills sharing and learning will grow from 30 million in 2021 to nearly 100 million by 2030.
The technology to get that music online is well-established. Decades ago, Apple’s GarageBand opened the doors to self-produced music. Today, making music is far easier. BandLab, an online music creation platform, has 60 million users. Spotify-owned Soundtrap is another online music creation and collaboration tool. Any number of low-cost distributors, such as DistroKid and TuneCore, will get creators’ music to download and streaming sites around the world. LANDR cuts out the middleman and acts as both digital audio workstation and distributor.
That glut of music is good for some, bad for others. It’s great for distributors and developers of music creation tools. It’s bad for record labels that must fight harder to get their tracks heard and risk ceding market share. It’s a mixed bag for consumers who have unlimited access yet face a paradox of choice. How the industry will deal with all this music is unclear. What’s certain is there’s a lot of music out there — and the pace of new releases is only going to accelerate.
Drake reportedly became the first artist in Spotify history to surpass 75 billion collective streams, and used the moment to call out the streamer and advocate for artists.
“We should get bonuses like athletes to motivate the future artists to be consistent and competitive,” he wrote in an Instagram Story resharing a graphic that looks to be from Spotify, but which the streamer does not appear to have shared on its official accounts. “So feel free to send me a LeBron sized cheque[,] I have enough dinner plates.”
To drive his point home even further, the rapper punctuated the thought with a laughing emoji and heart with an arrow running through it, and made sure to tag Spotify’s Instagram handle, too.
Billboard has reached out to Spotify for comment.
The superstar’s streaming success has been fueled in part by his latest string of singles and guest features, including No. 1 hit “Jimmy Cooks” and follow-up “Circo Loco” — both with 21 Savage — as well as Popcaan’s “We Caa Done,” DJ Khaled’s “Staying Alive” also featuring Lil Baby and Future’s “Wait for U” with Tems.
Meanwhile, Drake and 21 Savage’s latest hit “Rich Flex” recently ascended to the dual summits of both the R&B/Hip-Hop and Rhythmic Airplay charts — the collab’s latest No. 1 tallies after also peaking atop the Hot R&B/Hip-Hop Songs and Hot Rap Songs charts as well.
Next week, Drizzy is set to hit the stage at the private jet complex Scottsdale Hangar One in Scottsdale, Ariz., for h.wood Homecoming ahead of Super Bowl LVII.
Check out Drake’s message to Spotify here before it expires.
Spotify’s share price rose 12.7% to $112.71 on Tuesday (Jan. 31) following the company’s earnings release for 2022’s fourth quarter earlier in the day.
Now with a market capitalization of $21.8 billion, Spotify has more than overcome the investor exodus following its underwhelming third-quarter earnings results. After delivering a weaker-than-expected gross margin on Oct. 25, Spotify’s share price fell 13% to $84.42 and bottomed out at $69.29 on Nov. 4. Tuesday’s closing price marked a 62.7% improvement in fewer than three months.
Investors want Spotify to continue adding subscribers while improving its margins. Tuesday’s earnings results delivered on both fronts. Its fourth-quarter subscriber growth of 10 million handily beat guidance of 7 million, giving the company 205 million subscribers globally. The company’s monthly active user base of 489 million was 10 million ahead of guidance.
In the fourth quarter, Spotify’s gross margin of 25.3% was 80 basis points — eight-tenths of a percentage point — above guidance “due primarily to lower podcast spend along with broad-based favorability in our core music business,” said CFO Paul Vogel during Tuesday’s earnings call.
Spotify’s licensing deals with record labels and publishers give it little room for improvement on recorded music margins, which were 28% in 2021. Podcasting, however, gives Spotify an opportunity to attract advertising dollars with meaningfully better margins. During a June 2022 presentation to investors, Spotify executives said they expect podcast margins to reach 30-35% within three to five years and 40-50% further in the future.
Just last week, investors were shown a new commitment to cost-cutting when Spotify announced on Jan. 23 that it would lay off 6% of its global headcount. Among the departures — though technically not part of the layoffs — was chief content officer Dawn Ostroff, the engineer of the company’s strategy to build its podcast business by attracting marquee names such as Joe Rogan, Kim Kardashian and Barack and Michelle Obama. Her exit could signal an end to an era of expensive content deals that helped make Spotify the most popular podcast platform in many markets.
For the first quarter of 2023, Spotify forecasts 3.1 billion euros ($3.37 billion) of total revenue and gross margins of roughly 25% excluding severance charges, and an operating loss of 194 million euros ($211 million), including 35 million euros to 45 million euros ($38 million to $49 million) in severance charges.
“Gross margins and operating expenses are expected to improve throughout the year,” said Vogel, adding that first-quarter margins will be the low point for 2023 because “some of the investments we made in the back half of [2022] is still slightly impacting Q1.” In addition, with the recent 6% reduction in headcount, “we see our operating expenses growing slower with a material improvement in our operating loss compared with 2022,” he added.
Spotify CEO Daniel Ek stressed his company’s focus “on tightening our spend and becoming more efficient” in the company’s fourth quarter earnings call on Tuesday (January 31) — the first such call since Spotify announced it was laying off 6% of its global workforce.
In a statement following the layoff announcement, Ek wrote that “in a challenging economic environment, efficiency takes on greater importance.” And the idea of “efficiency” was hammered home again and again on the latest earnings call — the word was sprinkled liberally throughout the remarks of both Ek and CFO Paul Vogel. “The next era of Spotify is one where we’re adding speed plus efficiency,” Ek said, not one “just focused on speed or growth at all costs.”
But he also emphasized that “this doesn’t mean that we’re changing our strategy” overall. “We will continue to work to build the platform of the future,” Ek vowed, “and that will take investment in new opportunities that we outlined, like podcasts and audiobooks.”
While Ek acknowledged that Spotify “probably got a little carried away [in 2022] and over-invested relative to the uncertainty we saw in the market,” he said that, given the choice, he “would do it again.” According to Ek, not only did that investment help grow Spotify’s user count — the company added premium subscribers at a higher-than-expected rate — but it helped differentiate Spotify from its competitors.
Responding to a question about how Spotify was working to compete with TikTok, Ek said “we’re in a better position competitively than we’ve been for many many years.” By adding podcasts and audiobooks to Spotify’s music offering, he added, the platform has created “a much more resilient consumer experience.”
While Ek had said Spotify was exploring raising U.S. subscription prices during an earnings call last year, he said “I don’t have anything specific to announce at this point” on Tuesday. But he noted that the platform raised prices in “more than 40 markets around the world” last year and that “our priority is to grow revenue as fast as we possibly can.”
When asked about potential price increases a second time, Ek responded that “we’re thinking how we can grow our business the best possible way.” “Sometimes that is keeping the price low to grow the number of users on the platform,” he continued. “Sometimes it is increasing the revenue per user. Sometimes it’s increasing our margin per user… the important part is that this is something that creates win wins with our label partners too.”
Investors asked Spotify for additional information about two 2022 initiatives, its moves into audiobooks and selling concert tickets, but company executives were scant on specifics. “It’s early days on audiobooks,” Ek said. “We’re seeing some encouraging signs. We’re definitely seeing people take up the offering.” He added that “audiobooks have a massive opportunity and there are very few consumers currently participating in the ecosystem,” echoing his comments from Spotify’s 2022 Investor Day.
When it came to Spotify’s nascent live events business, Ek underscored that his company isn’t aiming to “go compete with the [existing live music] ecosystem.” Instead, he said, Spotify hopes to “enable the ecosystem.” “Users are asking us, ‘help me find more great things to go watch,’” Ek explained. That translated to a “tremendous uptick in the number of people visiting the concerts tab on Spotify in 2022.”
“If we can be a partner to creators and help them sell more of their tickets,” Ek added, “that’s a meaningful increase to many artists’ livelihood, which is great and something we’re focused on.”