Spotify Technology SA thinks that its podcast business, which has been criticised by investors for being a risky and expensive bet, will start making money in the next one to two years.
“This slowdown won’t last,” Chief Financial Officer Paul Vogel told investors Wednesday during a presentation. He was with Daniel Ek, who is the CEO of Spotify, and other top executives.
Investors have been worried about how much money Spotify has spent on podcasts. The company has spent more than $1 billion to become the market leader in this area. When Spotify said in April that costs for content other than music were hurting its ability to make money, the price dropped.
Daniel Ek is building a monsterous machine over next decade @eldsjal @Spotify
$100 billion of revenues
40% gross margins
20% operating margins #SpotifyInvestorDay $SPOT pic.twitter.com/pdgYhrnw74— Rich Greenfield, LightShed 🔦 (@RichLightShed) June 8, 2022
Officials said during the presentation that the pressure on the margin will ease after 2022. Vogel says that over the next three to five years, Spotify thinks podcasts will bring in gross margins of 30% to 35%. In the long run, the company thinks its margins will be between 40% and 50%, which is 10% higher than what it had thought before.
During the presentation, shares of Spotify went up by more than 9% before giving back some of those gains. After hitting all-time lows in May, the stock was up 6.1% at 2:46 p.m. in New York to $116.08.
Vogel thinks that by 2021, the income from podcasts will have grown by more than 300 percent, reaching about 200 million euros ($214 million). But the company’s gross profit was cut by 103 million euros.
