Spotify said its operating losses are due to higher advertising and personnel costs, while the company recently announced plans to cut its global workforce by 6pc.
Spotify managed to surpass the milestone of 200m paid subscribers in 2022, though the company’s operating losses continue to mount.
In its fourth quarter results for 2022, the streaming service had roughly 205m paid subscribers, a 14pc year-on-year increase. This subscriber growth also helped Spotify reach 489m monthly-active-users in the same period.
Spotify’s total revenue for this quarter was €3.2bn, which was in line with the company’s own predictions.
The company said the strong subscriber base helped increase revenue for its premium subscription service to more than €2.7bn, while podcasts supported ad-supported revenue.
“Looking back on 2022 in its entirety, we are pleased with our overall results,” Spotify said in a statement. “Each year presents certain challenges and opportunities and, over the past 12 months, we largely delivered on our internal goals and we are excited about the momentum we are building heading into 2023.”
The company said its gross profit dropped in the fourth quarter due to new podcast content and product investments. While the company’s operating losses were less than it predicted, these still reached €231m, a significant increase compared to the same quarter in 2021.
The operating losses were attributed to rises in the advertising market and “higher personnel costs” due to headcount growth.
The report comes a week after Spotify revealed plans to cut roughly 6pc of its global workforce, due to the stark difference in operational expenditure compared to revenue growth.
As of September 2022, Spotify employed about 9800 people globally, meaning the layoffs will affect more than 580 people.
In January alone, tech companies such as Microsoft, Alphabet, SAP, IBM, Intel, Amazon and Salesforce have confirmed plans to reduce their staff numbers.
Despite these issues, Spotify presented a positive outlook for the year ahead, with expectations of reaching 500m monthly-active-users for the first quarter of 2023. The company also plans to reduce its operating losses to €194m in the same quarter.
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