Spotify took a $41 million loss in podcast-related write-offs—mostly due to contract terminations.
The music company told investors it took steps to shrink its real estate footprint and rationalize certain areas of its podcasting business. “We also exited our Soundtrap Marketplace business. We expect all of these moves to have a positive impact on our rate of profitability on a go-forward basis,” Spotify told investors during its earnings call. “However, they did result in roughly EUR135 million of net charges in the quarter, with EUR44 million flowing through gross margin and EUR91 million flowing through our operating expense.
When asked to provide further details on its podcast content strategy, Daniel Ek elaborated on Spotify’s focus. “I think the biggest shift in our strategy is really around the more streamlined operations and that we’re being more careful about, now that we have a lot more data around, doubling down and renewing the things that did work and stop doing the things that didn’t work. And I think that’s the primary consideration that we’re going through.”
Ek was also asked about podcast content licensing that is up for renewal in 2024. “Not only are we in a different climate, but I think also to set expectations where we were four years ago—we had very little data to back-up our decisions on. So the most important thing is to contextualize it for investors. We were in a position where we thought podcast overall was under-monetized and underutilized by consumers and we had a real chance of breaking into the marketplace.”
“Now, we have a lot more data. We have a lot more data across the millions of podcasts we already have about what that does to new user acquisition, to retention, to conversion, to subscribers, et cetera. And not surprisingly, what we’re finding is that some of these shows work really well with our audience. Some of them don’t work well. Some of them work well, but during a different cost structure as we probably overpaid relative to what we should have done.”
“And so we’re coming at this with the process of rightsizing some deals, doubling down on some of the things that worked really nicely and then stepping out of some deals and relationships that hasn’t worked out.”