Spotify Promises Rosy Returns From Podcasts And Audiobooks Someday

Spotify Technology SA on Wednesday promised high-margin returns from its costly expansion into podcasts and audiobooks as the audio streaming company hosted its first investor day since going public in 2018, hoping to stoke Wall Street's enthusiasm despite the slowing global economy.

Shares of the company jumped 6% in morning trade after losing 53% of its market value so far in 2022, worse than the 24% drop in the S&P 500 communication services sector index, which includes Spotify and other media and social network companies.

"We are performing much better than you probably suspect, roughly 28.5% (margins) which is a significant progress in reaching our 30% to 35% long-term goal," Chief Executive Daniel Ek told investors.

One of the reasons for not reaching its long-term goals was its aggressive spending to build up its podcast and audiobooks platforms.

The company said it has committed more than $1 billion on podcasting and expects podcast revenue to increase materially this year from the $215 million (200 million euros) it made last year.

Ek expects the podcast business to have the potential to generate margins between 40% to 50% and audiobooks to also have margins over 40%.

He did not specify how long it would take for the company to hit those numbers.

While it has so far been a rough start to the year for streaming companies like Spotify and Netflix, the Swedish company also faced a controversy over moderating of its popular Joe Rogan podcasts.

The service though continued to add users and paying subscribers in the first quarter, reporting monthly users of 422 million, ahead of the consensus estimate.

($1 = 0.9314 euros)