Double-digit revenue and subscriber growth sparks monetisation focus at Spotify

Spotify reported double-digit growth in revenue and better-than-expected subscriber additions in its latest earnings.

The audio company’s revenue grew 16% year on year to €3.7bn in Q4 2023, with the majority — €3.1bn — coming from premium subscriptions and €501m from the ad-supported tier, up 17% and 12% respectively.

In its quarterly report, Spotify described its ad-supported revenue had hit an “all-time high”, with year-on-year growth across all regions.

Within ad-supported revenue, Spotify reported music advertising had double-digit growth as a result of increased sold impressions and “stable pricing”, while podcast ad revenue had “significant growth” in sold impressions across both original and licensed podcasts and the Spotify Audience Network, despite “softer pricing”.

In its earnings call, Spotify CEO Daniel Ek was asked about the strategy behind shifting podcasts including Call Her Daddy and The Joe Rogan Experience to non-exclusive distribution.

Ek said Spotify had “multiple strategies in podcasting” and while exclusivity was “net positive” on the subscriber side, it was “not driving as much the opportunity that we see on the ad side”.

Broadening podcast distribution can accomplish a number of goals, he added, noting that advertising is “a strong growth position for us”.

Rise in users

Revenue growth from the premium tier was led by subscriber growth and pricing, with a 1% increase in average revenue per user.

Spotify’s total monthly active users (MAUs) hit 602m, up 23% year on year. Within that, ad-supported MAUs increased 28% to 379m, while premium MAUs increased 15% to 236m.

MAU and premium subscriber growth were each 1m ahead of guidance.

A focus on monetisation

The company also reported its operating loss was “better due to lower marketing and personnel related costs” and it had more than doubled its operating income quarter on quarter to €68m. This was excluding €143m in “charges associated with efficiency actions taken late in the quarter”, namely laying off 17% of its workforce.

In his opening remarks, Ek said the streaming giant would have “an increased focus on monetisation” of user growth.

Previously, Ek has spoken about “efficiency” being a focus for the company. In the latest earnings call, he described having “a more disciplined approach” without sacrificing growth for profitability.

He said: “It is a new way for us to operate as a company — one where we’re consistently thinking about efficiency all the time. We started doing it in early 2023 and I think we are gradually becoming better, quarter by quarter. And I think investors should expect the same for 2024. We are going to continuously look at being more resourceful with the resources we have. That’s just the new modus operandi.”

In Spotify’s shareholder report, the company said revenue and profitability trends were “both inflecting favourably heading into 2024”, making the business “well-positioned to deliver improving growth and profitability”.

Looking ahead, Spotify predicted €3.6bn in revenue, a net addition of 3m new subscribers and 16m MAUs in Q1 2024.