Spotify on Wednesday forecast current-quarter subscribers lower than Wall Street expectations, but executives sought to reassure investors that growth had not cratered even as it deals with the fallout from the controversy around The Joe Rogan Experience podcast.
The company’s shares fell as much as 18% in late trading after Spotify reported the subscriber outlook.
“While we have not given full year guidance anymore on subscribers … we don’t expect a material difference in the net additions for either users or subscribers in 2022 relative to 2021,” Vogel told Reuters.
Shares wall losses and were down between 3% to 9% after the initial shock.
The outlook overshadowed fourth-quarter revenue, which came in higher than analysts’ estimates, as the music streaming company sold more advertisements and newer services such as podcasts, while recording a healthy 16% increase in paid subscribers for its premium service.
Total monthly active users rose 18% to a record 406m.
The company, however, forecast current-quarter paid subscribers of 183m, below expectations of 184m. Revenue is expected to meet estimates of 2.60bn euros.
The subscription music streaming service has invested over a $1bn in the podcasting business, led by marquee exclusive shows such as The Joe Rogan Experience.
But the allure of the podcast star also drew condemnation after his show aired controversial views around Covid-19, drawing protests from artists Neil Young and Joni Mitchell.
Rogan, a popular internet commentator, has since apologized and Spotify said it would start adding content advisories to episodes discussing Covid.
Chief executive officer Daniel Ek said the company already has a “sizable” content moderation team in place.
“We have taken action on more than 20,000 podcasts since the start of the pandemic,” Ek told Reuters. “So that tells you something about the scale of this operation. It’s truly a global operation.“
Ek acknowledged the Rogan controversy at the outset of the earnings conference call, saying it presented learning opportunities. He said he was proud of the steps Spotify took following the concerns raised by the medical and scientific communities and he says policies were developed with input from internal and external exports.
Spotify said podcast’s share of overall consumption hours on its platform reached an all-time high and it expanded its paid podcast subscriptions in 33 more markets and enabled podcasts for users in Russia, Egypt and Saudi Arabia.
Premium subscribers, which account for most of the company’s revenue, rose to 180m, beating analysts’ expectations of 179.9m.
Quarterly revenue rose to 2.69bn euros ($3.04bn) for the quarter from 2.17bn a year earlier, and above the 2.65bn euros expected by analysts, according to IBES data from Refinitiv.
Revenue from users who hear advertisements rose 40% to 394m euros or 15% of total revenue.
“Investors largely ignored Spotify’s advertising business during Spotify’s first few years as a public company, with subscriber growth dominating the narrative,” LightShed Partners analyst Richard Greenfield said in a note.
“As Spotify moved from a music platform to an audio platform (podcasting, live audio, audiobooks), it has unlocked the potential for a robust advertising business that is now too large for investors to ignore.”