Dive Brief:
- Spotify Technology shares jumped about 12% Tuesday as the music streaming company that has recently raised prices and cut staff reported its second quarter operating income swung to €266 million from an operating loss of €247 million in the year earlier period. This marks the company’s third consecutive quarter of profitability and the company also reported its Q2 gross profit jumped 45% year-over-year, according to company materials.
- The latest earnings report comes several quarters after the Sweden-based company decided it needed to prove it could be “a great business” along with providing a strong product, CEO Daniel Ek said during the company’s earnings call, describing this year as one focused on “monetization.” The company has added new subscription plans, increased prices in several markets including the U.S. and lowered operating expenses, executives said.
- Asked about consumers’ initial reaction or “churn” to the increase in U.S. prices, Spotify Interim CFO Ben Kung was cautiously optimistic.“It’s obviously still early days. We’ve only just taken this action and so we’re obviously monitoring this quite closely, but we’re encouraged by all of the right signals that one would expect to see,” Kung said, according to a SeekingAlpha transcript of the call. Ek also said the company was seeing less “churn” in the current round of increases than it did in its prior one.
Dive Insight:
The profitability push comes as Spotify’s finance leadership is in transition. In April the company appointed Christian Luiga, the CFO of Saab, to serve as its new finance chief beginning in the third quarter. The defense company said in April that Luiga had a notice period of six months and would stay with the company until Oct. 3 at the latest.
Spotify announced in December that its former CFO, Paul Vogel, was planning to leave the company at the end of March. Kung, vice president of financial planning and analysis at the company, was tapped at the time to take on “expanded responsibilities” pending a search for a permanent replacement, CFO Dive previously reported.
Despite being a dominant audio-streaming business, Spotify has lost money annually since it went public in 2018, according to Bloomberg. The company’s financial challenges largely stem from the fact that it pays out about 70% of its sales in royalties to the music industry, the publication said.
Spotify isn’t alone in raising prices. For example, Costco Wholesale earlier this month raised its membership fees for the first time since 2017. The increase comes as a number of retailers have recently been getting more aggressive about pricing, CFO Dive previously reported.
