Spotify Adds Users, Reports Loss

Spotify Technology reported strong user growth but another quarterly loss after the company invested extensively to build its podcast business.

The Wall Street Journal reports the audio giant, which last week laid off employees and reorganized its top brass, said it aims to become a more efficient business this year following an intense period of spending. Spotify’s chief content and advertising business officer, Dawn Ostroff, will leave the company. She spearheaded the company’s expansion into podcasting, helping acquire studios and ink deals with high-profile figures such as Joe Rogan, Michelle Obama and Kim Kardashian.

Spotify reported 489 million monthly active users, up 20% from a year earlier and besting the company’s guidance. The company highlighted growth in India and Indonesia as a result of marketing campaigns, as well as strength from its eighth annual Wrapped campaign and the holiday season.  

Paying subscribers, Spotify’s most lucrative type of customer, rose 14% to 205 million, also beating the company’s expectations, due to promotions and household plans.

Just before the quarter started, Spotify introduced its expansion into audiobooks, another move in the company’s evolution from a pure-play music service to a more diversified audio business. Users can now purchase and listen to a catalog of more than 300,000 titles from independent authors and major publishers on a pay-per-download basis. 

Chief Executive Daniel Ek has said Apple‘s App Store policies have hampered the rollout of its audiobook offerings. Spotify has directed users to make purchases through a web browser instead of inside the app. While it is a more cumbersome user experience, the move means Apple won’t be taking up to a 30% commission for downloads. Spotify has been fighting Apple over its in-app purchase policies for years.

Free cash flow, a measure of the cash a company generates from operations and viewed by many investors as a proxy for performance, was negative €73 million—equivalent to about negative $79 million—compared with €103 million a year earlier and €35 million in the prior quarter. The company, which had warned it would likely be negative for the period due to the timing of certain payments, said the metric was positive for the full year, a trend it expects to continue on a full-year basis going forward.

For years, executives have said the company will give priority to investment over profits as it works to attract users around the world and expand into new forms of audio. But last fall the company indicated that profitability is expected to improve this year as it moves on from a period of heavy investment.