Upfront of Spotify’s profitable earnings report on Wednesday morning, cofounder and CEO Daniel Ek and CFO Paul Vogel did a spherical of transient cellphone interviews. The earnings report largely speaks for itself: The streaming large reached 155 million paid subscribers within the fourth quarter of 2020, including a report 30 million for the 12 months, and its whole customers grew 27% to 345 million, including a report 74 million; and the corporate touted its podcast technique and reiterated its perception that the technique is paying again: The corporate mentioned 25% of its whole person base engaged with podcast content material within the quarter (up from 22% in Q3 and 16% within the fourth quarter of 2019). It additionally exceeded is monetary targets for income for the quarter, with whole gross sales up 24% (excluding the influence of overseas trade charges) and gross margin.
Whereas Ek and Vogel they demurred from a query about how the corporate was responding to Morgan Wallen’s racist slur revealed on Tuesday night time, they did reply different questions as expansively because the quick interview time allowed.
How is the corporate holding up after a 12 months of pandemic lockdown? Are all your workplaces closed, and do you will have a way of after they would possibly reopen?
Just about all of our workplaces, excluding perhaps two, are nonetheless closed, so the overwhelming majority of complete firm is working from dwelling. Clearly that’s been extremely difficult for us all, however the crew has confirmed unbelievable spirit in making it work. As for the sense of after we can open up once more, I don’t know. I’m centered on the security of our workers, and when the authorities deem it secure and we really feel we will supply a secure office, we are going to permit workers to come back again. However I can’t say at this level when it’s going to be — that’s the billion-dollar query that each monetary analyst on the planet is asking proper now.
It’s nice that you just donated $500,000 and gave a lot consideration to Save Our Phases, are you able to discuss concerning the inspiration for supporting unbiased venues?
That was not the one effort we supposed in 2020, we additionally put apart $10 million right into a COVID aid fund for artists, so that is one out of many initiatives that we’re doing. Usually, we help quite a few music teaching programs, particularly for various expertise, whether or not it’s feminine producers or ethnic teams. It simply looks like the suitable factor to do, to assist out the group to one of the best of our capability. I’m additionally glad concerning the “Artist Decide” [option on the Spotify platform] that permits artists to choose causes that they care about [for fans to contibute to]. There’s additionally a stay present characteristic on the service that we’ve up to date, so artists can announce [livestream performances]. There’s quite a few various things which have occurred all year long and we are going to proceed to do as a lot as we will.
In an interview final 12 months, you mainly mentioned that artists want to interact often with their followers, and that the standard cycle of releasing an album each two or three years might not be splendid for all artists lately, which many individuals appeared to see as a criticism. Do you are feeling what you mentioned was misconstrued?
I meant precisely what you simply mentioned in your query — that it’s essential to proceed the engagement between artist and client. I didn’t imply to indicate that folks must work tougher or crank out ten albums a 12 months. It’s very tough generally to be as eloquent as you will be in a five-minute dialog earlier than an earnings name — like this one, as effectively! — and I most likely might have phrased it loads higher than I did. However the music business is rising and streaming is an enormous a part of that progress, and Spotify is an enormous a part of that progress. I look again at the place the music business was when Spotify got here into it: It was in free-fall due to piracy, and we turned that round and it’s on track. Can issues be higher? After all they will, and we will be higher as effectively. However I have a look at the longer term and I’ve unbelievable optimism, and streaming will probably be an enormous a part of that.
Some individuals are skeptical about your podcast technique — do you are feeling the funding is paying again by way of with the ability to appeal to and retain subscribers? Do you will have any metrics that may present the return on funding?
We’re very, very comfy that this funding is working, and one of many factors we’ve used to information traders to have a look at is the expansion of the viewers in podcasts. Within the fourth quarter, over one-fourth of our customers are participating with podcasts on a month-to-month foundation, so we’re completely seeing a constructive impact.
Vogel: In case you look, over a 12 months in the past, we mentioned in a letter to shareholders that we noticed a constructive impact from podcast consumption by way of consideration and engagement. We didn’t really quantify it, however we imagine it’s a causal relationship.
What’s it primarily based on?
Vogel: Testing we’ve completed and work we’ve completed algorithmically with a crew that’s devoted to creating certain we perceive the worth of each piece of content material on our platform.