Spotify losses balloon after pandemic hiring binge

Spotify’s losses ballooned last quarter after a hiring spree during the pandemic drove up costs at the music streaming pioneer.

The fourth-quarter loss of €270mn was up from €39mn in the same period a year earlier, as the group’s operating costs climbed 44 per cent.

Spotify’s chief executive Daniel Ek recently admitted that the company had been “too ambitious” during the pandemic when lockdowns across large economies left consumers spending more time online and prompted tech companies to expand aggressively.

While Spotify’s losses widened in the last quarter, the US company signed up 10mn new subscribers in the period, taking its number of paid subscribers to 205mn and total users to 489mn. Revenue last quarter increased 18 per cent from a year earlier to €3.2bn, matching analyst forecasts.

The hit to profits comes a week after Spotify announced it would cut 6 per cent of its workforce — about 600 staff. Meta, Alphabet and Microsoft are among the big tech groups to have announced plans to slash staff this year.

Ek recently said that “in hindsight, I was too ambitious in investing ahead of our revenue growth”.

In a presentation to investors on Tuesday, Spotify said that “these investments largely reflect various growth initiatives that were greenlit towards the end of 2021”.

For the whole of 2022, Spotify reported a net loss of €430mn on €11.7bn in revenues. By comparison, the company lost €34mn last year on revenues of €9.7bn.

Spotify, now boasting almost half a billion users, has long struggled to translate its popularity and reach into a profitable business.

The group pays about 70 per cent of its revenue out to the owners of the music on the platform. To help offset the financial challenges of its core business, Spotify has pushed into areas outside of music, pouring billions of dollars into an ambitious expansion into podcasting.

While Wall Street initially cheered Spotify’s podcast gamble, investors have grown impatient with the strategy amid rising interest rates and faltering stock markets. Spotify’s stock has dropped more than 70 per cent from its pandemic highs two years ago, with the world’s largest music streaming company now valued at about $19bn.