Spotify Earnings: Subscribers, Losses Increase

Generation Z and overseas listeners helped Spotify notch its strongest ever quarter for new users, while the streaming giant reported steeper losses from podcasting cuts and higher music royalty costs, reports The Wall Street Journal.

The audio company is in the throes of an effort to improve profitability, which includes right-sizing its investments in podcasting and raising prices.

On Monday, Spotify said it is raising prices for its premium subscription to $10.99 a month in the U.S. from its longstanding price of $9.99, confirming an earlier report by The Wall Street Journal. The company had told investors it would raise prices this year as part of a continuing push to consistently turn a profit.

How many new subscribers did Spotify add? Spotify’s base of paying subscribers—its most lucrative type of customer—rose 17% to 220 million, topping the company’s expectations by three million.

Overall, the streamer reported 551 million monthly active users, a 27% jump from a year earlier, 21 million ahead of guidance and a record high for the company. The company said it was helped by successful marketing and improved retention. User growth was stronger than expected in all regions, with particular strength in Latin America, the company said. The company also added more younger listeners.

Is the company profitable? The company posted a wider loss equivalent to about $335 million for the quarter ended in June.  Its gross margin fell to 24.1% as a result of charges related to canceling podcast shows, staff layoffs and the impairment of excess real estate.

Spotify said it incurred higher music royalty costs in the period and saw some improvement in podcast profitability. For years, executives have said the company will give priority to investment in growth over profit as Spotify tried to attract users around the world and expand into new forms of audio. Last fall, the company indicated that profitability is expected to improve this year as it moves on from that period of heavy investment.

What about revenue? Overall revenue for the second quarter was up 11%, shy of the company’s forecast. 

How is its podcast business? In June, Spotify said it would cut about 200 jobs, or 2% of its workforce, after struggling to make money in podcasting. The company has consolidated some of its premier Gimlet and Parcast studios and axed many of its original shows. 

Spotify also loosened exclusivity arrangements with some of its podcasts, and has begun distributing them to other platforms in a move aimed at increasing the audience and ad potential of those shows. Exclusive deals with its biggest stars, including Joe Rogan, Alex Cooper and Emma Chamberlain, remain in place.