The MBW Review is where we aim our microscope towards some of the music biz’s biggest recent goings-on. This time, we report on Spotify‘s Q4 earnings call, in which Daniel Ek was grilled about the firm’s performance and recent Joe Rogan controversy. The MBW Review is supported by Instrumental.
“Stockholm Man you betta / keep your head / don’t forget what your / previously issued quarterly guidance said.”
MBW had been holding out a whisker of hope that a brave analyst might have warbled the above down the line to Daniel Ek on Spotify‘s Q4 earnings call yesterday.
Alas, it wasn’t to be – but there were plenty of interesting posers thrown Ek’s way, both about Neil Young’s protest against the Spotify platform, and about other crucial matters to the streamer’s business.
Spotify revealed yesterday that its subscriptions grew to 180 million in Q4 2021, up by 25 million year-on-year, and up by 8 million versus the previous quarter.
Meanwhile, Spotify ended 2021 with 406 million Monthly Active Users (MAUs), up 61m YoY – putting it on course for the magic half-billion mark over the next couple of years.
Here’s five of the most interesting things we learned from Mr Ek on SPOT’s earnings call…
1. “We don’t change our policies based on one creator, nor do we change it based on any media cycle.”
As expected, one of the main topics on the minds of analysts tuning into Spotify’s Q4 earnings call was the firm’s ongoing Joe Rogan debacle.
In the past week, led by Neil Young, a number of artists have requested to pull their music from the service due to content broadcast by Joe Rogan (aka Spotify’s $100 million poster boy for its billion dollar podcast strategy).
Ek was asked about the situation right out of the gate on the earnings call, and specifically whether Spotify’s response so far is a “slippery slope in censoring content on the platform”.
He said “this is a very complicated issue,” but that he’s “really proud of the steps we took following the concerns raised by the medical and scientific communities”.
“While Joe [Rogan] has a massive audience – he’s actually the No.1 podcast in more than 90 markets – he also has to abide by those policies.”
Daniel Ek
Added Ek: “The important part here is that we don’t change our policies based on one creator nor do we change it based on any media cycle or calls from anyone else.
“Our policies have been carefully written with the input from numbers of internal and external experts in this space. And I do believe they are right for our platform.”
2. There are 11 million creators on SpoT today… 3m more than a year ago.
This is arguably the biggest revelation for the music biz to emerge in Ek’s comments.
In his opening remarks, the Spotify founder outlined his vision for the platform, and pointed directly to the so-called ‘creator economy’.
He argued that the “rapid professionalization of creators” is “one of the biggest opportunities on the Internet”.
Ek also revealed that, at the close of 2021, there were 11 million creators (presumably including artist and podcast/audio creators) on Spotify.
Last February, at Spotify’s ‘Stream on Event’, Ek revealed that there were 8 million creators on the platform at the end of 2020.
Obviously enough, that means that 3 million new creators uploaded content to the platform in the last year.
This growth is notching up towards the “50 million active creators” Daniel Ek said he believes “the Spotify ecosystem” will house one day.
“Think of it as 50 million small-and medium-sized businesses that we can support by giving them the infrastructure and resources to grow.”
Added Ek yesterday: “Think of it as 50 million small-and medium-sized businesses that we can support by giving them the infrastructure and resources to grow.
“This evolution will take time, but I know some of you are wondering what this means in the near term. And the work there is already well underway.”
3. Superfans are “where the real dollars comes in”
“We constantly have some deal that’s being renegotiated or negotiated again and extended,” Ek explained about his company’s licensing agreements with music rightsholders.
In terms of key priorities for Spotify in such negotiations, Ek said that his company’s focus is working towards “enabling more flexibility on the platform”.
Ek further explained that Spotify wants to “act as a true platform where these creators can engage directly with their audience, [and] go from casual listeners to fans to superfans”.
Engaging with superfans, argues Ek, is “going to unlock the next wave of growth in the music economy”.
Spotify has already launched paid individual subscriptions for podcast creators, which allows fans to directly support their favorite podcasters.
Indie artists have so far been left wondering when the same tool might become available to them to directly monetize their own fanbases.
“The evolution here will be about unlocking through superfans. That’s where the real dollars comes in. And that was always the music business to begin with.”
Daniel Ek
Said Ek yesterday: “The evolution here will be about unlocking through superfans. That’s where the real dollars comes in. And that was always the music business to begin with.
“When we unlock that, we’ll unlock the next wave of growth in the music economy. So for me, that is the No.1 thing that I’m focused on: unlocking more flexibility, more ways for creators to use their assets, videos, engage with people, have their content show up in new unexpected ways.
“That will drive engagement and that, in turn, will drive people to move from casual listeners all the way up to a superfan and enables new forms of monetization, too.”
4. Audiobooks are a big opportunity and the West should look to markets like China to understand their potential..
Audiobooks are big business, with global audiobook revenues estimated to top $4.8 billion in 2021.
Spotify claimed in November that it wants to “revolutionize” the audiobooks space and that its acquisition of audiobook distribution company Findaway would help it to do so.
Ek was asked yesterday to put the audiobooks opportunity into context. He explained that “audiobooks, in our view, is a subset of the overall audio opportunity” and that it touches on “a very important creator group, which is authors”.
“It’s strange to imagine why more of that type of innovation [hasn’t] come to many of the Western markets as well.”
He then pointed to markets like China to highlight “the innovation” that’s happening in the audiobooks space. There were an estimated 560 million-plus audiobook users in China in 2020.
Said Ek: “For me, it’s strange to imagine why more of that type of innovation [hasn’t] come to many of the Western markets as well.
“And it’s really in that vein that you should think about the Spotify platform. There’s going to be a lot more openness and there’s going to be a lot more flexibility in how we treat content and creators on our platform.”
5. Spotify’s Q1 2022 guidance has annoyed some analyst – but Ek says it doesn’t “reflect any churn from the recent Joe Rogan thing”
Spotify revealed some big news about guidance yesterday: it no longer plans to issue annual forecasts to analysts.
SPOT told investors that from now on it will only use quarterly guidance “as checkpoints against our progress”.
As for its quarterly guidance for Q1 2022, SPOT forecasts that, by the end of March, it will have Total MAUs of 418 million and total Premium Subscribers of 183 million.
“Usually, when we’ve had controversies in the past, those are measured in months and not days.”
Ek was asked if that latter number reflects “elevated churn from the recent Joe Rogan controversy”.
He replied: “[The] easy answer is, we don’t reflect any churn from the recent JRE thing.”
He added: “In general, what I would say is it’s too early to know what the impact may be.
“Usually, when we’ve had controversies in the past, those are measured in months and not days. But I feel good about where we are in relation to that. And obviously, top line trends still look very healthy.”
