Streaming
Page: 69
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.
The music business, historically speaking, has not been great at consensus. But there does seem to be growing agreement from many quarters now that the existing payment structure for streaming royalties isn’t working for everyone and that a different approach is required.
This isn’t a new idea, but it’s one that’s quickly gathering steam in the wake of Universal Music Group chairman/CEO Lucian Grainge’s internal staff memo/open letter to the industry earlier this month, in which he called for an “updated model” for the music industry — one that will be “an innovative, ‘artist-centric’ model that values all subscribers and rewards the music they love.”
It wasn’t clear what, exactly, Grainge meant in the letter. And on Tuesday (Jan. 31), it became a little bit clearer that, as of yet, there isn’t much clarity on what it will mean — though UMG is hoping to find it. To that end, Universal has announced a partnership with TIDAL to “research how, by harnessing fan engagement, digital music services and platforms can generate greater commercial value for every type of artist,” according to a press release. Essentially, there are a lot of unknowns here other than that something needs to change.
That was more or less what UMG’s executive vp/chief digital officer Michael Nash said in a statement accompanying the release. “As the digital landscape continues to evolve, it’s become increasingly clear that music streaming’s economic model needs innovation to ensure a vibrant and sustainable future,” he said. “Tidal’s embrace of this transformational opportunity is especially exciting because the music ecosystem can work better — for every type of artist and fan — but only through dedicated, thoughtful collaboration. Built on deeply held, shared principles about the value of artistry and the importance of the artist-fan relationship, this strategic initiative will explore how to enhance and advance the model in keeping with our collective objectives.”
This is not TIDAL’s first attempt at stepping out of the traditional streaming royalties model, in which streaming income is collected and divvied up among rights holders according to their share of total streams. In November 2021, the streamer announced a new three-tier membership structure and a step into a user-centric royalty model for its premium tier, which endeavored to pay rights holders based on the streaming activity of each individual user — with the additional element that 10% of each user’s subscription fee would go directly to their most-streamed artist.
That, in itself, is a twist on the “fan-powered royalties” that SoundCloud first rolled out in March 2021, which allocated streaming revenue to artists based on which acts a given user listened to, and which Warner Music Group opted into last year. (Deezer has also publicly supported a user-centric model.) SoundCloud says that artists using FPR generate 60% more streaming revenue than those who use the more traditional model, though it’s currently only being offered to indie artists and WMG artists on the SoundCloud platform; a MiDiA study said that 56% of artists were better off with FPR. Access to the data on who the fans are who are streaming that music the most, SoundCloud has said, is the true game-changer for the model.
There has, however, been some hesitance around that user-centric idea, mainly due to studies conducted in the last few years surrounding who would benefit, and at the expense of whom, by the switch. One study found that for 99.4% of artists, the switch would equate to less than a 5% bump in royalties — for many, effectively just a few euros per year — which could be offset by the administrative costs of the switch itself for the platform. That could disproportionately affect R&B/hip-hop artists, given that the genres have thrived in the streaming era, to the benefit of other, smaller or more niche genres. And it would definitely take away from top earners’ revenue — i.e., artists who wield an outsized voice in the business. A general view became that the switch would equate to moving money from one bucket to another, without really moving the needle for most artists at all.
TIDAL, in today’s announcement, effectively conceded the point and said they are stepping away from the user-centric model they were pursuing in order to take a step back and join in this new research project with UMG. “We are setting aside our current fan-centered royalties investigation to focus on this opportunity for more impact,” TIDAL’s Jesse Dorogusker said in a statement. “This partnership will enable us to rethink how we can sustainably improve royalties’ distribution for the breadth of artists on our platform.”
What they’re saying is, essentially, it’s time for a new study to see if there are better, perhaps more nuanced, ways to change up a model that pretty much everyone is beginning to agree is no longer functioning the way it was originally intended. “At TIDAL, we learned from [fan-centered royalties] there is an opportunity to build a royalties distribution model that could be better at compensating the breadth of genres and artists that contribute to streaming catalogs,” TIDAL’s global head of communications Sade Ayodele tells Billboard. “Many of the alternative models explored, however well intended that they are, unfortunately create a new set of winners and losers. With this partnership, we’re hoping to find a fairer and more equitable distribution approach that benefits a broader set of genres and artists contributing to the culture of music.”
Which brings us, again, to the original question: What will that look like? The answer could be varied, and it could be different for each streaming service. There have been some conversations in some sectors of the industry about weighting music streams higher than background sounds, for instance, or more heavily weighting intentional listening (searching for or clicking on a song or artist) over background listening (a playlist, or an algorithmically-chosen next song). There are already different models around ad-supported vs. paid subscription payouts, and there is a conversation to be had about how fan engagement should or could influence where money is directed. What UMG and TIDAL are trying to say with Tuesday’s announcement is, let’s go try some things and see what works, and let everyone else know what we’re doing so that maybe they can try to find an innovative answer, too.
Consensus is a hard thing to come by. There likely won’t be a consensus around what the end solution is, and several options could eventually emerge. But streaming has been around for more than a decade now, and if there’s any consensus at all, it’s that something needs to change.
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.”
Spotify ended 2022 with 205 million subscribers, annual revenue of 11.7 billion euros ($12.4 billion) — up 21% from 2021 — and an acknowledgment that “things change” regarding the company’s bold investment in podcasting and its recent “tightening” of spending.
“In hindsight I probably got a little carried away and over invested relative to the uncertainty we saw shaping up in the market,” said CEO Daniel Ek in an earnings call with investors on Tuesday (Jan. 31). “So we are shifting to tightening our spend and becoming more efficient.”
Ek added that “it was the right call to invest and I would do it again” because it set the company apart from competitors, but the souring macro economic environment requires them to pull back. “To be clear this doesn’t mean we are changing our strategy,” he asserted.
The company spent hundreds of millions of dollars acquiring exclusive rights to podcast programming (see: Joe Rogan, Prince Harry and others) and startups, but in recent months began eliminating some original shows and trimming staff at its Parcast and Gimlet studios. Earlier this month, Spotify announced it would shed 6% of its workforce, roughly 600 employees. It also canceled numerous shows that it had been promoting on its separate Spotify Live app.
“You go for growth first and then you seek efficiency,” Ek said.
Elsewhere in the call, the company laid out its fourth-quarter results, with revenue of 3.166 billion euros ($3.38 billion), representing 18% growth year-over-year. Subscription revenue was 2.7 billion euros ($2.88 billion) of that tally, a 18% increase year over year. Advertising revenue was 449 million euros ($479 million), up 14% year over year. Its user base grew to 205 premium subscribers, up from 195 million in Q3, and 295 million free (ad-supported) users, up from 273 million. Total monthly active users (MAUs) have hit the 489 million mark, up from 456 million last quarter.
Average revenue per user was 4.55 euros ($4.85) in the fourth quarter, down slightly from 4.63 euros ($4.94) in the third quarter. Excluding the impact of the foreign exchange market, Spotify attributed the change to a “product and market mix.”
Spotify’s gross margin of 25.3% — 80 basis points above guidance, the company said — was slightly better than the 24.7% registered in the third quarter but still a full percentage point below the 26.5% in the prior-year period. The company attributed the change to “lower investment spending and broad-based music favorability.”
Spotify reported an operating loss of 231 million euros ($246 million), up from 228 million euros in Q3 and a 7 million euro loss back in Q4 2021. A slew of higher personnel costs due to headcount growth — that has since been halted (except for internships) — and higher advertising costs, as well as currency movements, was cited for the rise in losses during the quarter. The company also said that its business has more than 3.4 billion euros ($3.6 billion) in liquidity and that its free cash flow was actually in the negative in the quarter — by 73 million euros — but that for the full year the company ended with 21 million euros ($22 million).
Financial Metrics (Q4 2022 vs. Q4 2021)
Revenue: 3.166 billion euros ($3.38 billion), up 18% year over year from 2.689 billion euros
Gross margin: 25.3%, compared to 26.5% the prior-year quarter
Operating loss: 231 million euros, up from a 7-million euros loss
Free cash flow: 73 million euros, down from 103 million euros
Listener Metrics (Q4 2022 vs. Q3 2022)
Paid subscribers: 205 million, up 5% from 195 million in Q3
Ad-supported listeners: 295 million, up 8% from 273 million in Q3
Total monthly active users (MAUs): 489 million, up 7% from 456 million in Q3
Average revenue per subscriber: 4.55 euros, up from 4.63 euros in Q3
Q1 2023 Guidance
Revenue: 3.1 billion euros
Subscribers: 207 million
MAUs: 500 million
Gross margin: 24.9%
Operating loss: 194 million
The Ledger is a weekly newsletter about the economics of the music business. An abbreviated version of the newsletter is published online. The Ledger is sent to Billboard Pro subscribers. You can also sign up here to receive The Ledger and many other Billboard newsletters.
A youth movement of sorts hit music’s top 10 tracks in the U.S. last year, even as music consumption generally shifted toward older recordings.
The average age of a track in the top ten on-demand streaming songs in the U.S. was nearly five months younger in 2022 (346 days) than in 2021 (492 days), according to a Billboard analysis of Luminate data. In 2021, the top 10 tracks were evenly divided between current (defined by Luminate as younger than 18 months) and catalog (older than 18 months), as of Dec. 31, 2021. Glass Animals’ “Heat Waves,” released in June 2020, was No. 5 that year. The No. 1 track, Dua Lipa’s “Levitating,” was released in March 2020. The No. 10 track, The Weeknd’s “Blinding Lights,” was released in 2019.
In 2022, nine of the top 10 tracks were current releases, meaning they were less than 18 months old on Dec. 31, 2022. “Heat Waves” was the lone catalog track in the top 10. The top track, Harry Styles’ “As It Was,” was a spry 276 days old. Steve Lacy’s “Bad Habit,” the No. 9 track, was youngest at 185 days. “Levitating” still resonated with listeners but slipped to No. 20.
Outside of the top 10, however, the most popular music of the year continued to get older.
From 2021 to 2022, the average age of the top 25 on-demand tracks increased about a month and a half to 470 days old, excluding a notable outlier: Kate Bush’s 1985 recording “Running Up That Hill,” the No. 16 track of the year. Including Bush’s 13,620-day-old (as of Dec. 31, 2022) surprise hit, the average age of the top 25 tracks more than doubled.
Aging was more pronounced beyond the top 25. The average age of the top 1,000 on-demand audio streaming tracks increased from 3,287 days in 2021 to 3,462 days in 2022 — an increase of 176 days, or nearly six months. Notably, some younger catalog titles continued to defy gravity. Chris Stapleton’s 2014 track “Tennessee Whiskey” rose from No. 43 in 2021 to No. 33. Morgan Wallen’s “Whiskey Glasses,” from 2016, climbed from No. 62 to No. 32. The Neighborhood’s 2012 track “Sweater Weather,” a TikTok hit way back in Nov. 2020, improved from No. 76 to No. 34.
The aging of on-demand audio streams mirrors the continuing trend of catalog tracks accounting for a larger share of what Americans stream and purchase. According to Luminate, catalog’s share of total consumption — across all formats — climbed to 72.2% in 2022, up from 69.8% in 2021 and 65.1% in 2020.
Years ago, the line between current and catalog music meant more, since it usually followed the way stores shelved music. “That timeframe makes sense when you are talking about an artist’s typical album release cycle,” says Andy Moats, executive vp and director of music, sports and entertainment at Pinnacle Financial Partners.
In a financial sense, however, current music transitions to catalog over a long period of time. After an initial burst of earnings, music will earn less over some number of years — called “decay” — before settling at a consistent amount of annual royalties. “Most new release decay will occur in the first 36 to 48 months from release,” says Moats, and tracks typically level off and show growth from years 7 to 10.
Outliers like “Running Up That Hill” aside, increased catalog consumption stems mostly from music remaining popular beyond the 18-month mark. (Billboard wrote about the longevity of this “shallow catalog” in April 2022.) Today, catalog is as much about Fleetwood Mac’s 1977 song “Dreams” as The Weeknd’s 2020 song “Save Your Tears,” which remains popular on streaming services and was the No. 19 on-demand audio streaming track in the U.S. last year (down from No. 4 in 2021).
To the experts who value music assets, the ability of a relatively young catalog to increase its market share makes it more attractive. While older songs are typically more appealing to buyers because their earnings potential is more predictable than newer songs still experiencing annual decay, the trends seen in Luminate’s data suggest there could be more deals like Hipgnosis Capital Fund’s $200 million acquisition of Justin Bieber’s songwriting catalog and recorded music royalties. Nari Matsuura, partner at Citrin Cooperman, sees the catalog trends in Luminate’s data as a good sign for relatively young music. “This suggests that the value of newer catalogs should increase since their earnings will not decline as much in the near term but will be sustained at a higher level over a longer period.”
Six months ago, in an email to staff, Spotify CEO Daniel Ek said that the company would “be a bit more prudent” in its hiring over the next few quarters. That came a week after Spotify’s June 8, 2022, investor day presentation on its plans to improve its margins.
The key would be podcasts, executives said, along with a new foray into audiobooks. Within three to five years, podcasts could bring in gross margins of 30-35%, which could later rise to 40-50% — far more than the company can earn from recorded music.
The company’s podcast business hasn’t come cheap, though. Spotify – which on Monday (Jan. 23) announced plays to lay off 6% of its workforce, as well as the voluntary departure of chief content officer Dawn Ostroff – spent hundreds of millions of dollars acquiring podcast start-up and programing. Ostroff spent big to get exclusive rights to The Joe Rogan Experience, as well as projects from Barack and Michelle Obama’s Higher Ground Productions; Kim Kardashian; and Prince Harry, Duke of Sussex, and Meghan Markle.
From a programming perspective, the podcasts worked. Spotify is now the most popular podcast platform in the U.S., as well as many other markets, and the exclusive programming helps attract advertisers. The company also introduced new podcast advertising formats that helped it grow its podcasting business to $200 million annually.
The podcasts didn’t solve Spotify’s financial issues, though. The company has always grown fast by any measure, including audience, subscribers, and revenue. But since it paid out a significant share of its revenue to labels and publishers, Spotify never had the profit margins of former Wall Street darlings like Facebook and Netflix. Podcasts were supposed to solve this, but they cost so much up front that they caused a $103 million drag on gross profit, CFO Paul Vogel said during the June presentation.
Last year was difficult for stocks in general, especially those of many technology companies, but Spotify has suffered more than most. Riding high on lockdown-time gains, its share price peaked at $364.59 on Feb. 19, 2021. By a year later, it had fallen 58% to $152.27, and then on Nov. 4, 2022 bottomed out at $69.29 — 81% below its all-time high closing price. Had it made more progress on improving margins, Spotify’s share price probably would have weathered the storm a bit better.
Now, the market will find out if the adage “to cut is to cure” applies to the music streaming business. The layoffs Spotify announced Monday will involve around 600 employees. Not among them is chief content officer Dawn Ostroff, who chose to depart the company. Alex Norström, currently chief freemium business officer, will be responsible for product and will share co-president title with Gustav Söderström, currently chief research & development officer.
Citi analyst Jason Bazinet believes the layoffs are about “trying to stem the losses in podcasting.” Investors aren’t convinced Spotify has a viable business model, he says. “The revenues have done well but there’s not a lot of cash flow. A lot gets paid back to the labels.”
The market’s response to the news was positive, but muted. Spotify shares closed on Monday at $99.94, up 2.1%, after spiking to $104.00 that morning.
Overall, podcasting doesn’t seem to be working as well, or as quickly, as Spotify had hoped. While Spotify beat expectations for subscribers and monthly active users in the third quarter, its gross margin and operating loss were below earlier guidance.
The podcast business is an obvious place for Spotify to start cutting. The company began paring expenses in October by eliminating some original podcasts and cutting “at least” 37 positions at its Parcast and Gimlet studios.
“I think it’s the right strategy,” says Bazinet. “It’s going to be difficult to shift the balance of power with record labels.”
Now, the goal is to make Spotify more efficient, according to CEO Daniel Ek’s open letter released on Monday. “In hindsight, I was too ambitious in investing ahead of our revenue growth,” Ek wrote – meaning investing in personnel, not companies. The layoffs, as well as an organizational restructuring, will both control costs and quicken decision-making, he explained. Ek isn’t alone in highlighting efficiency lately. Facebook CEO Mark Zuckerberg has taken a hard line on underperforming employees. New Twitter CEO Elon Musk expects whatever workers remain at the company to be “extremely hardcore.”
Spotify’s numbers suggest that the company may have room for improvement. Bazinet points out that in 2016 Spotify’s roughly 2,100 employees generated an average of 1.41 million euros per person while in 2021 its 6,600 employees’ per-head revenue was 1.46 million euros. That implies that Spotify failed to achieve the kind of operating leverage that would create additional value as it added employees.
As for Ostroff, her departure could mark the end of the first chapter of Spotify’s podcast business. Neither Spotify nor investors seem to have much appetite for writing big checks these days. And exclusive content seems to have an inherently limited life span. Obama’s Higher Ground Productions left for Amazon. Brené Brown’s two exclusive podcasts, Unlocking Us and Dare to Lead, have come to an end.
Ostroff certainly made her mark on the company, though. The Joe Rogan Experience has battled through controversies to become the platform’s most popular podcast, heard by a quarter of Spotify users; and 19% of all podcast listeners in the U.S. listen to TJRE, according to a recent Morgan Stanley survey. Kardashian’s true crime podcast got off to a great start in October by beating TJRE and Markle’s Archetypes. Spotify’s foray into spoken-word audio may have been costly, but it was effective.
Now, Spotify enters a new phase of cost conscientiousness. With the layoffs and reorganization, it has given investors a tangible commitment to deliver on the aggressive goals it laid out in June. That heightens expectations, though. If Spotify can’t maintain its growth with a slightly smaller headcount, it will be hard for it to deliver better margins – and the market is unlikely to be forgiving.
The LGBTQ community has a long history of influencing music history for the better — be it through the creation of whole genres, the success of mainstream queer artists or otherwise. Now, Spotify wants to help amplify that influence.
On Tuesday (Jan. 24), the streaming service debuted their latest music program, GLOW. The project — much like fellow equity global music programs EQUAL and Frequency for female and Black creators, respectively — is specifically catered to LGBTQ artists, aiming to “elevate LGBTQIA+ creators, both on and off platform,” according to Spotify.
To fulfill that goal, GLOW will have a year-round hub on the platform housing LGBTQ-dedicated playlists for fans to discover new music from queer-identifying artists, with new playlists set to be introduced each month. One of these playlists is a global flagship playlist of the same name, featuring LGBTQ voices from around the world and refreshing each month with new offerings.
As with previous equity programs at Spotify, GLOW will also benefit from a “360 program,” which will provide opportunities for editiorial and marketing partnerships with other major brands as well as providing charitable giving to organizations benefiting LGBTQ arts causes, including QORDS, Black Trans Femmes in the Arts (The BTFA Collective), It Gets Better and more.
GLOW will additionally shine a spotlight on different LGBTQ artists every month, with 11 — including Sam Smith, Arlo Parks, Tove Lo and Pabllo Vittar — showcased at launch. Future spotlight artists will be featured on Spotify’s For the Record editorial channel as well as on a Times Square billboard.
Cahleb Derry, an associate manager of music marketing at Spotify, said in a statement that the aim of GLOW was to provide needed support for a community that often doesn’t receive it. “The question we go back to is, ‘How do we tangibly influence the resources that LGBTQIA+ artists have?’” he said. “We know that a lot of artists only get hit up in June during Pride to do campaigns. And then July 1 hits and there’s no work to be found again … we, at Spotify, have a responsibility as the largest music audio platform in the world to fill in these gaps.”
The GLOW launch is a bright spot that comes amid Spotify’s announcement on Monday that they would be cutting 6% of their global workforce and that chief content & advertising business officer Dawn Ostroff would be departing her role. “I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us,” Daniel Ek said in a note to employees posted on the company’s website. “In hindsight, I was too ambitious in investing ahead of our revenue growth.”
Check out the official GLOW Spotify hub here.
Spotify’s Dawn Ostroff praised the growth of the audio giant’s podcasting expansion shortly after CEO Daniel Ek revealed a major leadership reorganization on Monday morning that will see Ostroff exit the company.
The reorganization, accompanied by a round of layoffs that will impact roughly 600 employees, involves consolidating Spotify’s business operations under co-president Alex Norström, who most recently oversaw the company’s freemium business. Ostroff, who joined Spotify in 2018 from Condé Nast Entertainment, will transition to an adviser role before formally leaving the company as her divisions now fall under Norström’s purview.
In a note to staff, obtained by The Hollywood Reporter, Ostroff praised Norström and reflected on the growth and impact of Spotify’s podcasting team, writing that the platform’s original and exclusive shows — which includes hits like The Joe Rogan Experience, Call Her Daddy and the original series Caso 63 — account for roughly 20 percent despite representing about 0.05 percent of shows on the platform.
“I’m so proud that we’ve built a home for creators to bring their art to the world in ways no one could have previously imagined. And while I’m very much excited about my next step, working alongside and learning so much from so many of you has been a privilege,” Ostroff wrote. “The memories of the moments, the stress, and the laughter we shared have helped me grow and better appreciate the journey … and for that, I will always be grateful. I wish you every success on the next chapter of the Spotify story.”
Read the full memo below.
Looking back on the past four and a half years, I am incredibly proud of what we’ve built together. It’s our best-in-class music operation where we have strengthened our relationships across the business, earned the respect of the industry, and become great partners. The entire music team is the heart and soul of this company.
Working together, our podcasting team has revolutionized the space. This organization’s trajectory has been astonishing, going from practically zero market share and a handful of podcasts, to the leading platform with more than five million podcasts today and a 30x increase in podcast consumption on the platform. And I’m really proud of what we have built with our original and exclusive shows–despite being just .05% of the number of shows on the platform, they account for ~20% of consumption. This includes a string of hits that had Spotify O&E shows occupy 6 of the top 10, and 24 of the top 100 slots on our global charts in 2022. In addition, we’ve learned so much from creators about the opportunities in video as we’ve seen the numbers surge.
Over the past two years, we’ve modernized the advertising business to make it essential to brands and clients. And we have delivered, doubling our ad revenue to well over a billion euros in the process. The technology and innovation that the global ad and sales team has brought to market ensures that there will be billions more to come. That growth is set to change the marketplace forever, especially under the strong leadership of my dear friend Alex, who has my every confidence.
We’ve championed marginalized voices and worked to drive much-needed change in the audio industry. I’m so proud that we’ve built a home for creators to bring their art to the world in ways no one could have previously imagined. And while I’m very much excited about my next step, working alongside and learning so much from so many of you has been a privilege. The memories of the moments, the stress, and the laughter we shared have helped me grow and better appreciate the journey … and for that, I will always be grateful. I wish you every success on the next chapter of the Spotify story.
Dawn
This story was originally published on THR.com.
Spotify Technology SA said on Monday it would cut its workforce by 6% amid a broader leadership shuffle, according to a filing with the U.S. Securities and Exchange Commission.
The company said it estimates 35-45 million euros ($38-$49 million USD) of charges related to letting these employees go, and that its chief content & advertising business officer Dawn Ostroff will also leave the company. Ostroff will act as a senior adviser helping to facilitate the reorganization, which will include Alex Norström, currently freemium business officer, and Gustav Söderström, currently chief research & development officer, becoming co-presidents of Spotify.
Spotify is the latest big tech company to announce a wave of layoffs, following a similar announcement by Google parent company Alphabet, which said last week that it would let go of some 12,000 workers.
Companies, including Spotify and Alphabet, staffed up during the pandemic and are now looking to cut costs amid slowing global economic growth.
Spotify employed 9,800 employees, according to recent filings. The company will announce its most recent quarterly earnings on January 31.
Several music companies let go of staff or cut investment budgets in the second half of 2022 in preparation for a possible economic downturn. Spotify said it would cut hiring by 25%, SoundCloud laid off 20% of its staff and BMI said it was cutting just under 10% of its total workforce, through a combination of letting 30 people go and leaving certain jobs unfilled.
Spotify is set to have layoffs as soon as this week as the company moves forward with plans to reduce operational expenses, according to a person familiar with the matter.
The layoffs are expected to be more broad than a previous round of cuts in October, which impacted staff members working on canceled shows from in-house podcast studios Gimlet and Parcast.
A representative for Spotify declined to comment.
Spotify executives have previously signaled plans to reduce headcount-related expenses, with CEO Daniel Ek telling staff last June that the company would reduce its hiring growth by 25 percent and “be a bit more prudent with the absolute level of new hires over the next few quarters.” Paul Vogel, the company’s chief financial officer, also pointed to “increasing uncertainty regarding the global economy” at Spotify’s investor day in June as a reason for “evaluating [Spotify’s] headcount growth in the near term.”
Though the exact number of layoffs — first reported by Bloomberg — is not immediately clear, other tech companies like Amazon, Microsoft and Meta have each announced major rounds of layoffs impacting thousands of employees in recent months. The most recent layoff announcement came from Google parent company Alphabet, which is set to reduce its staff by 6 percent, which represents around 12,000 employees.
As of the end of the third quarter, Spotify employed around 9,800 people. The audio company brought in €3.04 billion in revenue and added 195 million paid subscribers during the third quarter. At the time, Ek said the economic downturn had not had a “material impact” on the company’s business but that Spotify would be “more selective” with its “overall spending.”
Spotify will report its fourth-quarter earnings on Jan. 31 before the market opens.
This article originally appeared in THR.com.