Spotify losses increase after pandemic spending splurge
More bad news for the world’s biggest streaming service. Spotify saw its financial losses dramatically increase over the last fiscal quarter due to a massive hiring spree over the pandemic. The news comes from a new report by The Financial Times, which claimed that Spotify’s fourth-quarter losses from 2021 were as high as €270million, which amounts to roughly $ 300 million.
Founder and chief executive officer Daniel Ek had previously admitted that Spotify’s approach to hiring during the pandemic was “too ambitious”. The streaming service saw record profits that were a direct result of users being in their homes during the lockdown.
During the same period that Spotify claimed to have lost €270million, the service added more than 200 million paid users. The number of people worldwide who pay for Spotify subscriptions has risen to nearly 500 million accounts. The Financial Times also reports that Spotify saw an increase in revenue in 2022, bringing their total worth to €3.2billion. In turn, the service increased its staff and, subsequently, increased its operating costs. However, no information on how Spotify was able to increase revenue while still feeling the need to cut operating costs has been released.
The financial news comes just a week after Spotify announced that it would be laying off six per cent of its workforce. Roughly 600 staff members at Spotify were informed that their positions would be terminated this week. Spotify is just the most recent among tech companies like Meta and Microsoft to cut staff at the start of 2023.
During a presentation to investors, Spotify claimed that the hiring increases “largely reflect various growth initiatives that were greenlit towards the end of 2021”. The service reported a loss of €430million in 2022 against €11.7billion in revenue.
Spotify is reportedly paying 70 per cent of its revenue to the owners of the music on the platform, but most of the money has yet to make its way to actual artists. Instead, record companies and publishers are seeing the majority of the revenue from the streaming service, with artists making approximately $.004 per stream as of 2022.
Spotify’s overall value is now estimated to be hovering around $19 billion. That’s more than enough to offset its losses in 2022, but the company’s stock is steadily dropping in value after Spotify invested heavily in original podcasting (including giving Joe Rogan a controversial platform) throughout the 2020s. The outlook for Spotify is uncertain, although it appears to be too big too fail, given its increasing popularity among average music fans.
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