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.
To reach its ambitious goal, Spotify would need to make its
revenue grow nearly 10-fold from 2021 revenue of $11.4 billion, and Chief
Executive Daniel Ek also forecast gross margins to jump to 40 percent and
operating margin to 20 percent in the same time.
"Spotify will put out these pretty audacious targets
and we are going after these because that's how we see the world and we are
going to invest behind that," Ek said.
Shares of the company rose 6.5 percent on Wednesday after
losing 53 percent of its market value so far in 2022, worse than the 24 percent
drop in the S&P 500 communication services sector index, which includes
Spotify and other media and social network companies.
Ek began the nearly four-hour investor presentation trying
to reset Wall Street's perceptions of the company, saying some may think
"we're a bad business or at least a business with bad margins for the
foreseeable future."
One of the reasons for not reaching its long-term goals was
its aggressive spending to build up its podcast and audiobooks platforms.
Though Ek said its investments are already performing "better than you
probably expect," with gross margins of 28.5 percent, well on its way to reaching
the company's 30 percent-35 percent long-term goal.
Spotify's chief content officer, Dawn Ostroff, said the
company has committed more than $1 billion to podcasting, and expects podcast
revenue to increase materially this year from the $215 million it made last
year. She said the company was still in investment mode, but it believes
podcasting to be a $20 billion opportunity.
Ek expects the podcast business to have the potential to
generate margins between 40 percent to 50 percent and audiobooks to also have
margins over 40 percent. He did not specify how long it would take for the
company to hit those numbers.
Apart from music, podcasts, and audiobooks, Spotify is also
planning to enter new types of content over the next 10 years that would boost
its average revenue per user, engineering manager Alexander Nordstrom said. He
said Spotify was on track to hit its goal of 1 billion users by 2030.
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. © Reuters