The Ledger: Spotify’s Paul Vogel is cautiously optimistic about growth

The Ledger is a weekly newsletter about the economics of the music industry sent to Billboard Pro subscribers. An abridged version of the newsletter is published online.

Music executives are balancing optimism about streaming growth with caution about the state of the economy and future growth.

As we reported Wednesday, Spotify had a solid second quarter, ending with 188 million subscribers — 1 million ahead of its guidance., It also reached 433 million total monthly listeners — 5 million above its guidance. Beating guidance helped Spotify shares climb 12.2% to $116.61 on Wednesday, the highest mark since June 24.

In the second quarter, Spotify’s subscription growth was led by Europe and Latin America, while emerging markets such as India, Indonesia and the Philippines were standouts among monthly active users, according to the company’s Q2 2022 earnings report presentation. This is par for the course, according to Spotify’s CFO Paul Vogel who spoke with Billboard after published income statement. Emerging markets, he says, will provide users, but not necessarily income – at least initially.

“We have this dynamic where we still have growth in our developed markets,” Vogel says, “And we think the opportunity to grow monetization is really there. We’re seeing even faster [user] growth in our developing markets. And monetization will come — a little bit now, but more in the coming years.”

Vogel says these emerging markets — large populations with significant middle classes — will improve over time. Initially, Spotify wanted to launch in markets where they had a complete understanding of the marketing and product/market fit. But after launching in around 80 additional markets in February 2021, Spotify is learning through experience. “We’re just getting better at local marketing, local advertising [and] tailor the message to individual markets.”

Universal Music Group also sounded a cautious-yet-positive note about subscription growth in its earnings call Wednesday. Michael Nash, executive director of digital strategy, noted that UMG is “certainly monitoring developments” and paying attention to macroeconomic trends, but doesn’t see “any indication right now that we’re going to see a problem in terms of sustained growth.” According to Nash, “consumer insights indicate that nearly 60% of the subscription growth potential over the next few years is still in our top 10 developed markets.” Nash also mentioned “a huge opportunity for growth in new markets.”

Despite posting better-than-expected gains in monthly active users and subscribers, Spotify doesn’t seem to be taking the growth for granted. “I think only the paranoid survive,” Vogel said during Wednesday’s earnings call, “and we’re preparing as if things could get worse.” This means keeping an eye on consumption and maintaining margins. Vogel reminded analysts that Spotify decided to “proactively” reduce its hiring growth rate by 25% in the third quarter, which Billboard reported on 15 June.

Importantly, Spotify is not seeing a “real impact” on its subscriber outlook from the increasingly tenuous macroeconomic conditions. Vogel said during the earnings call that Spotify expects “similar” net inflows — acquisitions minus exits — in the third quarter, and “several” markets are trending ahead of forecasts.

He is also reticent about growth potential in subscription fees, which have led to small improvements in average earnings per month. spend in recent quarters (ARPU was flat in the second quarter when excluding foreign currency). “We believe we have the ability to increase prices over time to monetize at higher levels.” However, he added that Spotify is aware of the headwinds it faces. “Even though we’ve talked about how well we’ve done it from a user and child perspective, it still doesn’t change the fact that the macro [economic environment] isn’t great.”


Through July 29, the % change over the last week, and the year-to-date change.

Universal Music Group (AS: UMG): 22.06 euros, +3.0%, -11.0% YTD
Spotify (NYSE: SPOT ): $113.02, +1.2%, -51.7% YTD
SiriusXM (Nasdaq: SIRI): $6.68, +3.4%, +5.2% YTD​​​​
Warner Music Group (Nasdaq: WMG ): $30.00, +9.1%, -30.5% YTD
Live Nation (NYSE: LYV ): $93.99, +2.6%, -21.5% YTD
HYPE (KS 352820): KRW 175,500, +5.1%, -49.7% YTD
iHeartMedia (Nasdaq: IHRT): $7.48, -3.5%, -64.4% YTD​​​​
Deezer (PA: DEEZR ): €3.70, -14.9%, -38.3% YTD

NYSE Composite: 15,327.71, +3.6%, -10.7% YTD​​​​​​
Nasdaq: 12,390.69, +4.7%, -20.8% YTD​​​​​​
S&P 500: 4,130.29, +4.3%, -13.3% YTD

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