Spotify aims to get $100 billion revenue in 10 years

Spotify Technology SA said on Wednesday that it aims to achieve $100 billion in annual revenue in the next ten years and that its pricey expansion into podcasts and audiobooks would provide 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 almost 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 operational margins to 20% in the same time frame.

“Spotify will set these fairly lofty goals, and we’re going after them because that’s how we view the world, and we’re going to invest in it,” Ek added.

The company’s stock surged 6.5 percent on Wednesday after losing 53% of its market value in 2022, outperforming the  500 communication services sector index, which includes Spotify and other media and social network businesses, by 24 percent.

Ek opened the almost four-hour investor presentation by attempting to change Wall Street’s opinions of the company, stating that “we’re a horrible business or at least a business with bad margins for the foreseeable future” for some.

One of the causes for the company’s failure to meet its long-term objectives was its excessive expenditure to expand its podcast and audiobook platforms. Though Ek claims that its investments are doing “better than you probably imagine,” with gross margins of 28.5 percent, the firm is well on its approach to meeting its long-term objective of 30 percent to 35 percent.

Dawn Ostroff, Spotify’s chief content officer, said the firm has invested more than $1 billion on podcasting and expects podcast income to climb significantly this year compared to last year’s $215 million (200 million euros). She stated that the firm 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 likewise 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 other categories of content over the next ten years, boosting its average income per user, according to engineering manager Alexander Nordstrom. He stated that Spotify was on track to reach its 1 billion subscriber goal by 2030.

While streaming businesses like Spotify and Netflix have had a difficult start to the year, the Swedish corporation has also been embroiled in a dispute over the censoring of its famous Joe Rogan podcasts.

However, the site continued to gain users and paying customers in the first quarter, claiming 422 million monthly users, which was more than the average projection.

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