As per the sources, we came to know that Spotify Technology SA (SPOT.N) said on Wednesday that it expects to achieve $100 billion in annual revenue in the next ten years and that its costly expansion into podcasts and audiobooks will yield high-margin returns. The audio streaming service had its first investor day since going public in 2018, trying to pique Wall Street’s interest despite the global economic slowdown.
Spotify will have to nearly double its revenue from $11.4 billion in 2021 to meet its ambitious objective, while Chief Executive Daniel Ek expects gross margins to soar to 40% and operating margins to 20% in the same time frame.
Daniel Ek and Spotify
Spotify, according to Ek, will set some really ambitious goals, which they will pursue since that is how they see the world and where they will invest. The company’s stock surged 6.5 percent on Wednesday after losing 53% of its value in 2022, outperforming the S&P 500 communication services sector index (.SPLRCL), which contains Spotify and other media and social network giants, by 24 percent.
Ek opened the nearly four-hour investor presentation by attempting to change Wall Street’s impressions of the company, stating that some may believe it is a horrible business or at the very least a business with bad margins for the time being.
One of the causes for the company’s failure to meet its long-term objectives was its excessive spending to expand its podcast and audiobook platforms. Though Ek claims that its investments are already doing better than we might expect, with gross margins of 28.5 percent, the business is well on its approach to meeting its long-term goal of 30 percent to 35 percent.
Commitment to Podcasting
Dawn Ostroff, Spotify’s chief content officer, said the firm has committed more than $1 billion to podcasting and expects podcast income to climb significantly this year compared to last year’s $215 million (200 million euros). She stated that the company is still in the investing phase, but that podcasting represents a $20 billion possibility.
Ek believes that the podcast industry has the potential to create margins of 40% to 50%, and that audiobooks will also have margins of 40% or more. He didn’t say how long it would take the corporation to reach those targets.
Apart from music, podcasts, and audiobooks, Spotify plans to expand into new categories of content over the next ten years, boosting its average revenue per user, according to engineering manager Alexander Nordstrom. He stated that Spotify was on track to reach its 1 billion user goal by 2030.
While streaming businesses like Spotify and Netflix (NFLX.O) have had a difficult start to the year, the Swedish company has also been embroiled in a dispute over the censoring of its popular Joe Rogan podcasts. However, the service continued to gain users and paying customers in the first quarter, reporting 422 million monthly users, which was higher than the average projection.