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Spotify Technology SA Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Total revenue was $4.2 billion, up 17% YoY on a constant currency basis.
- The company saw a positive trend on subscriber net additions from emerging markets in Q4.
- The company enhanced its product in areas like video and audiobooks in Q4, with many more innovations to come in the quarters ahead.
- The company made some exciting updates in Q4, including launching its new video proposition at scale.
- Ad sales are weaker, and the gross margin will be lower in that quarter.
- The company anticipates a gross margin of 31.5% and an operating income of $548 million.
- The company is forecasting $4.2 billion in total revenue.
- The company is investing at a prudent level in AI today.
- The company expects more profitability growth to come from developed markets rather than emerging markets.
- The company is making progress on subscriber net additions from emerging markets.
Q&A Highlights from Spotify Technology SA Earnings Call Q4 2024
- Analyst asked about Spotify's long-term goal for mobile time spent with video versus audio only, and whether TV will play a role in video growth over time.
- Spotify's management did not provide a specific long-term goal for mobile time spent with video versus audio only, but they did mention that they plan to invest in their core offerings, including video, and that they expect to see higher gross margins in the second half of the year. They also mentioned that the seasonality will play a role in their growth, and that there may be some variability in margins across quarters.
- Spotify's management did not provide a specific long-term goal for mobile time spent with video versus audio only, but they did mention that they plan to invest in their core offerings, including video, and that they expect to see higher gross margins in the second half of the year. They also mentioned that the seasonality will play a role in their growth, and that there may be some variability in margins across quarters.
- Analyst asked about the impact of the Spotify Partner Program on creators and the expected impact on margins in the first quarter.
- Spotify's management mentioned that they have seen tremendous results and a big uptake on video podcasters coming to the platform, and that more and more of them are adopting the partner program. They also mentioned that they feel good about the program's impact on margins, but there may be some variability across quarters.
- Spotify's management mentioned that they have seen tremendous results and a big uptake on video podcasters coming to the platform, and that more and more of them are adopting the partner program. They also mentioned that they feel good about the program's impact on margins, but there may be some variability across quarters.
- Analyst asked about the drivers of the record MAU net additions across marketing, promotions, and other factors, and how it positions Spotify for premium subscriber additions in 2025.
- Daniel Ek, CEO of Spotify, explained that the company is operating in a highly competitive marketplace with lots of competitors, including global tech platforms and local regional ones. He mentioned that local regional competitors tend to be present in early stages of markets, but fall away as the market matures. He also stated that the company is focused on driving the best products, which will lead to the highest lifetime value, and ultimately, drive premium subscriber additions.
- Daniel Ek, CEO of Spotify, explained that the company is operating in a highly competitive marketplace with lots of competitors, including global tech platforms and local regional ones. He mentioned that local regional competitors tend to be present in early stages of markets, but fall away as the market matures. He also stated that the company is focused on driving the best products, which will lead to the highest lifetime value, and ultimately, drive premium subscriber additions.
- Analyst asked about the impact of Spotify's new agreement with Universal Music Group on the company's ability to diversify its service beyond music and drive improving margins. The analyst also asked if there will be any changes to how music royalties are calculated over time.
- Daniel Ek, CEO of Spotify, explained that the company has always viewed its relationship with labels as a win-win dynamic, and that their focus has been on driving meaningful scale, which has led to improved margins and profits. He also stated that the company believes that their new agreement with Universal Music Group sets them up for strong growth, which will benefit both the company and its label ecosystems.
- Daniel Ek, CEO of Spotify, explained that the company has always viewed its relationship with labels as a win-win dynamic, and that their focus has been on driving meaningful scale, which has led to improved margins and profits. He also stated that the company believes that their new agreement with Universal Music Group sets them up for strong growth, which will benefit both the company and its label ecosystems.
- Analyst asked about Spotify's culture and how it has changed since Christian Carl Peter Luiga joined the company.
- Christian Carl Peter Luiga explained that Spotify's culture is focused on creating value through technology and platform, and that the company is also focused on staying focused. He also mentioned that it's fun to be at Spotify, and that he's working on improving scalability through structure and proof points.
- Christian Carl Peter Luiga explained that Spotify's culture is focused on creating value through technology and platform, and that the company is also focused on staying focused. He also mentioned that it's fun to be at Spotify, and that he's working on improving scalability through structure and proof points.
- Analyst asked about the building blocks for growth in Spotify's advertising business and how video inventory around creator efforts could accelerate the ad possibility.
- Daniel Ek explained that the advertising market is growing rapidly and that Spotify has a unique inventory of audio engagement that is very high and sticky. He also mentioned that the company is implementing automation and programmatic to meet the increasing demand for advertising, and that video inventory will also help to increase supply and meet demand.
- Daniel Ek explained that the advertising market is growing rapidly and that Spotify has a unique inventory of audio engagement that is very high and sticky. He also mentioned that the company is implementing automation and programmatic to meet the increasing demand for advertising, and that video inventory will also help to increase supply and meet demand.
- Analyst asked about the expected sequential decline in gross margins in Q1 2025 and if the new deal with Universal is a factor.
- Christian Carl Peter Luiga explained that the decline in gross margins is due to seasonality, with Q1 typically being a weaker quarter for ad sales. Additionally, the company has made investments in video and other areas, which will also impact margins.
- Christian Carl Peter Luiga explained that the decline in gross margins is due to seasonality, with Q1 typically being a weaker quarter for ad sales. Additionally, the company has made investments in video and other areas, which will also impact margins.
- Analyst asked about the podcast expense trajectory exiting 2024 and when accretion can be expected.
- Christian Carl Peter Luiga stated that the company is targeting disciplined investments that will create future value for customers and investment that gives healthy returns over time, but may have an impact on the margin.
- Christian Carl Peter Luiga stated that the company is targeting disciplined investments that will create future value for customers and investment that gives healthy returns over time, but may have an impact on the margin.
- Analyst asked about the company's perspective on Artificial General Intelligence and how it might benefit Spotify's business over the long term.
- Daniel Ek stated that the company is considering the benefits of Artificial General Intelligence and how it might benefit its business over the long term, but did not provide further details.
- Daniel Ek stated that the company is considering the benefits of Artificial General Intelligence and how it might benefit its business over the long term, but did not provide further details.
- Analyst asked about the potential for tiering pricing by content instead of degree of access like family, duo, etc., and if there is flexibility under agreements with content providers for a podcast tier.
- Daniel Ek mentioned that Spotify is moving from a one-size-fits-all approach to a more specialized tier to adapt to the growing consumer base of 263 million. He also stated that there will be many more versions of Spotify in the future that will adapt to different subsegments of the consumer base. He did not provide specific details, but the company is excited about entering a new era of a more tailored Spotify for user needs.
- Daniel Ek mentioned that Spotify is moving from a one-size-fits-all approach to a more specialized tier to adapt to the growing consumer base of 263 million. He also stated that there will be many more versions of Spotify in the future that will adapt to different subsegments of the consumer base. He did not provide specific details, but the company is excited about entering a new era of a more tailored Spotify for user needs.
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