Spotify hit by cost of ending aggressive podcast push

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Spotify posted a €302mn loss last quarter as the group raised costs by scrapping podcasts and cutting jobs, leading to a record number of new users signing up during the period.

After investing heavily in an ambitious foray into podcasts during the pandemic, Spotify has backtracked over the past year as investors grew impatient with the strategy.

The company disclosed the cost of the retreat on Tuesday, saying it had incurred €91 million “related to efficiency efforts”, such as real estate losses and severance payments to the employees it laid off.

The hit caused total losses of €302mn in the three months to the end of June, more than double the €125mn in the same period last year. Group revenue rose 11 percent from a year earlier to €3.2 billion.

Spotify has canceled several of its original podcast shows over the past year, including several true crime series during the quarter, as it merged its Gimlet and Parcast studios.

While Spotify’s bottom line took a hit during the quarter, the company added 10 million paying subscribers and 36 million users overall. More than half a billion people – 551 million users – are now signed up for Spotify worldwide.

The strong growth suggests that the subscriber slump revealed by Netflix, which spurred a strong correction in US media stocks, hasn’t applied to Spotify.

Shares of Spotify were down about 15 percent during mid-day trading in New York.

It has been under pressure from shareholders to curb costs. Activist investor ValueAct bought a stake in Spotify in February, arguing that the music service’s costs had “exploded” as it built out its podcast business.

Chief financial officer Paul Vogel told the Financial Times earlier this year that podcasts were “a major drag on our business in 2022” and that “when things are not working, we will accelerate to pull the plug”.

The group said on Monday it was raising prices in the US, UK and several other countries. In the US, a standard Spotify subscription will now cost $11, up from $10 – the first such increase since it launched in the country more than a decade ago. The move comes after rival Apple Music raised the price of its subscription to $11 last year.

On its website, Spotify explained the price increase as a move to help the company “continue to innovate in changing market conditions”.