Spotify CEO Daniel Ek |
Shares of Spotify tumbled Wednesday after the music streaming service -- roiled in controversy over its star podcaster Joe Rogan — projected lower profit margins in the coming 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 earlier forecasts.
But the streaming service forecast its first quarter 2022
gross profit margin would fall to 25 percent from 26.5 percent. And it
projected adding just three million premium subscribers in that period, a
marked slowdown from recent quarters.
Over the last week, Spotify has been hit with the defection
of several music superstars including Neil Young and Joni Mitchell over its
handling of Rogan's controversial statements on COVID-19 vaccines.
Executives nevertheless touted the platform's long-term
growth potential and broadly defended their handling of the Rogan controversy,
adding that it was too soon to know how it would affect the company's financial
performance.
Spotify's shares fell 10.9 percent to $171.00 in after-hours
trading.
The stock has fallen sharply steeply over the last year,
along with other "stay-at-home" stocks that benefited from the
disruptions to daily life caused by the COVID-19 pandemic.
The company reported a quarterly loss of EUR 39 million as
revenues increased 24 percent to EUR 2.7 billion.
Spotify pointed to "continued momentum in our
subscription business and meaningful advertising results," adding that
"we see a tremendous amount of greenfield on the horizon."
Spotify's press release made no mention of the Rogan
controversy, while emphasising that consumption trends on the podcasting
platform "remained strong."
Too early to gauge impact
On Sunday, Chief Executive Daniel Ek announced that Spotify
would add a content advisory to any podcast that discusses 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.
"Our policies have been carefully written with the
input from numbers of internal and external experts in this space."
Ek said it was "too early" to gauge the impact of
the Rogan controversy on his business, adding "usually when we've had
controversies in the past, those are measured in months and not days."
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