Spotify’s Chief Financial Officer, Paul Vogel, announced during the company’s third-quarter earnings call on Tuesday that they are on course to reach a break-even point in their podcast business by next year. Back in June 2022, Vogel had laid out the goal of making Spotify’s podcast segment profitable within one to two years.
“We’re right in line with that timeline,” Vogel said during the earnings call. “We should actually get to break-even in podcasting pretty soon. And we feel really good about the trajectory of the podcasting trends having gone from a pretty big drag a year ago, to something that’s a pretty minimal drag to something that should be positive to gross profit in a pretty short term.”
This progress is underpinned by substantial growth in podcast advertising revenue, which has consistently remained in the robust double-digit range, as indicated in the shareholder presentation. This increase was somewhat offset by a slight decline in pricing. It’s worth noting that Spotify doesn’t provide a separate breakdown of its podcast margins from the rest of its operations.
Spotify’s positive outlook aligns with the reports from podcast networks in the second quarter of this year. During that period, industry executives informed shareholders about improvements in the U.S. advertising market and anticipated sustained growth in the third quarter and beyond. This followed a somewhat lackluster performance in ad revenue during the first quarter of 2023.
Spotify’s CEO, Daniel Ek, revealed on Tuesday that their approach to enhance podcast profitability involves reducing spendings and attracting additional advertising revenue to bolster their overall earnings.
In Q3 2023, Spotify reported a substantial 11% year-over-year growth in total revenue, reaching €3.4 billion. Additionally, there was a 6% increase in revenue compared to the previous quarter. Advertising revenue also showed remarkable performance, growing by 16% year over year to €447 million and 11% when compared to the previous quarter.
Spotify’s subscriber base continued to expand, with a 16% year-over-year growth, bringing the total to 226 million subscribers. In the same quarter, they experienced a net addition of 6 million subscribers, marking a 3% increase quarter over quarter. Monthly active users also surged, rising by 26% year over year to 574 million. During the quarter, there were 23 million new MAU additions, reflecting a 4% growth compared to the previous quarter.
Earlier this month, Spotify announced a partnership with Roku to bring video ads to the streaming experience.