Audio streaming giant Spotify posted better-than-expected subscriber gains as part of its fourth-quarter and full-year 2023 earnings report on Tuesday. It also reported a narrowed fourth-quarter operating loss despite charges for layoffs related to its efforts to push toward sustainable profitability, with its bottom line helped by price increases, cost reductions and growth in its advertising business.
The company ended 2023 with 236 million paying premium subscribers, up from 226 million as of the end of September and compared with its forecast that it would reach 235 million in the latest period. “Fourth-quarter net additions of 10 million contributed to a record full year of net additions of 31 million,” the firm highlighted.
Stockholm-headquartered Spotify, led by CEO Daniel Ek, also reported that it hit 602 million monthly active users (MAUs) as of the end of 2023, up from 574 million at the end of the third quarter. The company had previously estimated it would end the latest period with 601 million MAUs. “Net additions of 28 million represented the second-largest fourth-quarter net addition performance in our history,” it said on Tuesday.
Spotify’s quarterly operating loss amounted to €75 million ($80 million), “which was better than our updated guidance,” it said, and compared to €270 million in the year-ago period. “Excluding one-time charges, we generated €68 million ($73 million) in adjusted operating profit, which is more than double the third quarter as the business continues momentum towards sustainable growth and profitability,” it highlighted. The charges amounted to €143 million ($153 million) and were “associated with efficiency actions taken late in the quarter,” Spotify said. In the third quarter, the company had swung to a surprise operating profit of €32 million.
Fourth-quarter revenue jumped 16 percent to €3.67 billion ($3.94 billion), in line with the company’s forecast.
Premium revenue grew 17 percent, or 21 percent when assuming constant currencies, “reflecting subscriber growth of 15 percent year-over-year and a premium average revenue per user (ARPU) increase of 1 percent year-over-year to €4.60 ($4.94), or up 5 percent constant currency,” Spotify said. “Excluding the impact of foreign exchange, ARPU performance was driven by price increase benefits, partially offset by product and market mix.”
Ad-supported revenue grew 12 percent, or 17 percent in constant-currency terms, reflecting growth across all regions, hitting what the company said was an all-time high of €501 million ($538 million). “Music advertising revenue grew double-digits driven by growth in impressions sold and stable pricing,” the company said. “Podcast advertising revenue grew in the healthy double-digit range, driven by significant growth in sold impressions across original and licensed podcasts and the Spotify Audience Network, partially offset by softer pricing.”
“With revenue and profitability trends both reflecting favorably heading into 2024, we view the business as well positioned to deliver improving growth and profitability,” the company said in its earnings update.
Last week, Spotify struck a new multiyear podcast deal with Joe Rogan. As part of its, The Joe Rogan Experience show, which has been the top podcast of the year globally at Spotify for the past four years, will soon be distributed across several podcast platforms, as well as on YouTube, rather than remaining exclusive to Spotify. In addition to distribution, Spotify will handle advertising sales for the podcast.
The company also launched an audiobooks offering for premium subscribers on Oct. 3, starting in the U.K. and Australia, followed by the U.S.
Amid escalating costs, Spotify has been undertaking several cost-cutting measures. The streaming giant laid off 200 employees in June, after previously laying off 600 employees in January and conducting layoffs in October. It then laid off 17 percent of its staff in December.
The company has also made programming cuts, including ending its exclusive podcasting deal with Prince Harry and Meghan Markle in June. And Spotify merged podcasting studios Parcast and Gimlet into a single division after canceling 10 shows from the two companies.