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Despite the ups and downs of operating in an uncertain economic and political climate and Spotify’s foray into hardware, Spotify’s push to complement music streaming with podcasts and related content appears to be paying off.
The company reported quarterly revenue in which its monthly active users grew 19 percent, or 19 million, to 433 million — 5 million more than its own guidance. The company had initially predicted that its exit from Russia and service outages in the quarter would result in only 14 million new users. Paid users now reach 188 million, up 14 percent.
But it missed gross margins, which it said was negatively impacted by the company’s decision to stop manufacturing car parts to control in-vehicle music. Spotify is taking a 31 million euro ($31.4 million) fee as a break on that line of business.
“The goal of Spotify’s Car Thing search was to better understand in-car listening and bring audio to a variety of users and vehicles,” a spokesperson told TechCrunch. “Based on a number of factors, including product demand and supply chain issues, we decided to produce more car parts. Existing equipment will perform as intended. This initiative has opened up helpful lessons, and we will focus on the car as an important area for audio.”
The device was only launched earlier this year, and at the time of this story it’s still being sold, but with great discounts. Spotify supports those sold, but this looks to be the end of the line for Spotify’s much-discussed move to hardware. Spotify noted that costs related to the car item were partially offset by a positive change in earlier estimates of rights holder liabilities. Gross margin fell to 24.6% from 28.4% a year ago, and missed Spotify’s own estimate of 25.2%.
Spotify beat its estimates for sales and earnings overall, but remains profitable. Its net loss for the quarter was $197 million (€194 million), on sales of $2.9 billion (€2.864 billion).
Podcasts remain a bright spot for the company. Spotify says it now has 4.4 million podcasts on its platform, and that “the number of MAUs engaged with podcasts continues to grow at high double-digits each year and the rate of podcast consumption per user continues to increase.”
As the company pushed deeper into advertising for its free user base, the percentage of its total revenue supported by advertising was the highest it’s ever been. Looking at the charts for the past quarters, however, you can see that total revenues are still growing faster than advertised, so the big question will always be whether the larger base can be balanced with revenue sales.
Premium ARPU, the highest-grossing graphic, is also seeing a wide gap compared to overall premium revenues, although Spotify has said some of that has been offset by price increases for subscriptions.
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