$100 billion in revenue on the cards for Spotify in the next 10 years

9 Jun 2022 , 11:33 AM

Spotify Technology SA said on Wednesday that it aims to reach $100 billion in annual revenue in the next ten years and that its costly expansion into podcasts and audiobooks will yield high-margin returns. The audio streaming service had its first investor day since going public in 2018, trying to pique Wall Street’s interest despite the global economic slowdown.

Spotify will have to nearly grow its revenue 10 times over, from $11.4 billion in 2021 to meet its ambitious objective, while Chief Executive Daniel Ek expects gross margins to soar to 40% and operating margins to 20% in the same time frame.

The company’s stock increased 5% on Wednesday after losing 53% of its market value in 2022, outperforming the S&P 500 communication services sector index, which includes Spotify and other media and social network companies, by 24 percent.

One of the causes of the company’s failure to meet its long-term objectives was its excessive spending to expand its podcast and audiobook platforms. The firm stated that it has committed more than $1 billion to podcasting and that it expects podcast revenue to expand significantly this year compared to last year’s $215 million (200 million euros).

The CEO believes that the podcast industry has the potential to create margins of 40% to 50%, and that audiobooks will also have margins of 40% or more. Although he did not give a time frame to accomplish these goals.

Apart from music, podcasts, and audiobooks, Spotify plans to expand into new categories of content over the next ten years, boosting its average revenue per user, according to engineering manager Alexander Nordstrom. He stated that Spotify was on track to reach its 1 billion user goal by 2030.

While streaming businesses like Spotify and Netflix have had a difficult start to the year, the Swedish corporation has also been embroiled in a controversy over the censoring of its popular Joe Rogan podcasts.

However, the service continued to gain users and paying customers in the first quarter, reporting 422 million monthly users, which was higher than the average projection. Given the current global sentiment and the stock already being down by 53%, it may be better to take these projections with a grain of salt. However, with the rise of household income in third world countries and Africa, the goals put forth in this meeting do seem achievable over a period of time.