Shares of Spotify fell on Wednesday after the streaming music service, mired in controversy over its star podcaster Joe Rogan, projected lower profit margins in the next earnings period as subscriber growth slows.
The company reported solid increases in the fourth quarter in terms of monthly active users and 180 million premium subscribers, in line with previous forecasts.
But the streaming service forecast its first-quarter 2022 gross profit margin to fall to 25 percent from 26.5 percent. And it projected to add just three million premium subscribers in that period, a marked slowdown from recent quarters.
Over the past week, Spotify has been hit with the defection of several music superstars, including Neil Young and Joni Mitchell, over their handling of Rogan’s controversial statements about COVID-19 vaccines. However, executives touted the platform’s long-term growth potential and widely defended its handling of the Rogan controversy, adding that it was too early to tell how it would affect the company’s financial performance.
Spotify shares fell 10.9 percent to $171.00 (approximately Rs 12,800) in after-hours trading.
The stock has fallen sharply over the past year, along with other “stay-at-home” stocks that have benefited from disruptions to daily life caused by the COVID-19 pandemic. The company reported a quarterly loss of EUR39 million (approximately Rs.) as revenue jumped 24 per cent to EUR2.7 billion.
Spotify noted “continued momentum in our subscription business and significant ad results,” adding that “we see a lot of green space on the horizon. Spotify’s press release did not mention the Rogan controversy, but did emphasize that consumer trends on the podcast platform “remained strong.”
Too soon to measure the impact On Sunday, Chief Executive Daniel Ek announced that Spotify would add a content notice to any podcast discussing COVID-19, directing users to government health authorities and other trusted sources.
The move followed criticism from Young and other artists who left the platform after a call from medical professionals to prevent Rogan from promoting “several falsehoods about COVID-19 vaccines.”
On Wednesday, Young’s former bandmates from Crosby, Stills, Nash and Young said they had asked their labels to remove their recordings from Spotify. Ek addressed the matter in opening remarks and again in response to repeated questions from analysts.
While saying Spotify could have articulated its policy sooner, Ek said he was pleased with how the company responded. We’re trying to balance creative expression with the safety of our users,” Ek said. We don’t change our policies based on one creator nor do we change it based on any media cycle, or call from anyone else,” he said.