So that's our general approach. And now we're holistically looking at it as one P&L and focus on driving efficiency across the board by readdressing resources to where it's most needed. And as that happening, it is impacting our business. 1 global streaming audio player, and that means having everything, as much as you could possibly think [of], in audio.. Broken down by vertical, Spotify's premium gross margin was 28.0% (down from 29.1% in Q3 2021), while ad-supported gross margin was 1.8% (down from 10.5% in Q3 2021). It's roughly 600 employees that were affected. Open. We've got time for one to two more questions. When Netflix was growing, people used to say, Well, how big can this company be? Vogel said. Next question from Rich Greenfield on audio books. So, when we look at a market, there's generally two strategies we can do that. Our next question is going to come from Michael Morris on advertising. And then we're going to holistically now look at the business rather than looking at things bit by bit. And how has it impacted your thinking about new categories, some of those new categories you teased at the Investor Day? We look at all the trends, and we try and understand how big these things could go. Noting continued growth in the smartphone market, Vogel said it was reasonable to assume that streaming will continue to grow as well. You're seeing a lot of Polish music being very impactful as well. This was a weak quarter for Spotify's revenue growth, which was masked by significant currency tailwinds. Thus, while investments in original/exclusive podcasts and to build out podcast infrastructure are a short-term drag on gross/operating margins, it is pleasing to see continued strength with podcast engagement amongst Spotify's base of MAUs. Now what you're probably asking underneath all of that is that it's been a drag on the gross margin side. It was definitely a driver of the outperformance in MAU and very intentional. Is this an area of focus? Spotify has struggled to gain traction in the public markets, falling 44% from their IPO price in April 2018 and 66% in 2022 alone. Yes. I'll take this and feel free to chime in, Paul. Investors hoping for Spotify management to change their tact and adopt a strict focus on reducing cash burn and optimising operating profitability were left seriously disappointed by their Q4 guidance. But I would just -- rather than perhaps giving any specifics here or preannounced things, I think that the most important thing I can do is kind of give a context in that there's two types of companies. We're now in an even stronger competitive position, and I'm confident in our future prospects. Well, we do a lot of experiments on the product side in many different areas. It is actually making real sort of material decision-making at the top. Paul Vogel is 47, he's been the Chief Financial Officer of Spotify Technology S.A since 2020. Paul Vogel is new to the role of Spotify CFO, but not to Spotifyor to the relationship between finance and the tech/media industry. The Ledger: Spotifys Paul Vogel Is Cautiously Optimistic on Growth We're going to go to the next one from Benjamin Black on margins. Could you give us an update on your ticketing business? So, what does that mean future? When Vogel joined Spotify in 2016, there were 1,500 employees. So, for instance, in the last 12 months, we grew our users substantially, enhanced our capabilities, developed a better product and brought more content to creators and users around the world. It's hard for people to understand when they're looking at us because it looks like it's an inferior product or an inferior strategy. So, we're not giving guidance, but I would say we feel really good about the momentum as we exit 2022. All right. It expects to add another 15 million monthly active users and 7 million net new paid subscribers. So, we are feeling good about the momentum exiting 2022. We feel really good about some of the acquisitions we've made, obviously, at the high-level megaphone, but chartable and pod sites and our ability to improve measurement and attribution across all of advertising. Today, the book market is worth $140 billion with audiobooks just a small fraction of that, he noted. And so, to have both Gustav and Alex help me in the day-to-day in this much more complex business, I think, will materially mean that we'll have more brains thinking about these things. A huge part of that, especially for the music audience is obviously touring. And are you seeing any conversion uplift? So, we expect that to improve and improve throughout the year. He is Wyraenie zgody jest dobrowolne. We think it's going to reduce friction and improve conversion over time. Spotify CFO: Company could achieve profitability, 'If we wanted to' Melvin Carters Cabinet is most diverse in St. As such, Ek remains confident that revenue attributed to podcasts and audiobooks should have materially gross margins at scale than music-related revenue: And as we've said before, this heavy investment that we've done on the podcasting side is going to reverse in 2023 as it starts moderating. But the separate part is on the user side, the same is true as well. And as a result, now we have 5 million creators on Spotify, so a massive increase in the number of people who are creating podcasts, you being one of them. Is this happening to you frequently? And if anything, thanks to our position in users and subs, this should allow us to both increase revenue per user over time as well as improve our stickiness with consumers even more. Is audio books as a category working? Fifteen years ago, Spotify was founded as a go-to destination for music lovers, a place where users could stream whatever tunes they wanted without having to buy them. It is also so that from a competitive lens, when we've added this content, what we're seeing is that consumers are not just consuming music on the platform, but they're consuming music and podcast to a great extent. spotify technology sa. Okay. How this CEO followed her curiosity to success, AI-boosted resumes increase the chance of being hired, Intel CEO on bringing chip manufacturing back to US. 2023 marks a new chapter for us, but our commitment to achieving our goals remains the same. This is for Daniel. So, we'll get some of the leverage on top of that investment in 2023, along with higher revenue growth and more gross profit dollars. For the story behind the numbers, we tapped the experts to join this weeks episode of Spotify: For the Record. CEO Daniel Ek and CFO Paul Vogel sat down with Dustee Jenkins, Head of Global Communications, to discuss the results and what they mean for the future of the platform. We had strength, family plan and Duo plan. Vogel, a University of Pennsylvania graduate, is a Wall Street veteran who started his financial career as an While Spotify's lack of consistent operating profitability is undeniably frustrating, I am not overly concerned for the following reasons: First, Spotify is in no danger of a capital raising with consistent positive free cash flow and a fortress balance sheet consisting of 3.7b cash, cash equivalents, and short-term investments. Grounded. So, what costs are driving Spotify's declining operating margins? So, it wasn't just that we took audience from another platform, but we actually grew the pie meaningfully for podcasters. And while it's too early to provide any guidance with respect to 2023, we do expect our profitability rates to improve relative to 2022 as we grow revenue, lap certain investments and deploy capital more efficiently. And in hindsight, I probably got a little carried away and overinvested relative to the uncertainty we saw shaping up in the market. The join flow is better, giving users the choice on payment methods and how they want to work with us and purchase from us. We're definitely seeing people take up the offering but we're nowhere done from where we want to be and where we believe the category can be doing. So, I just wanted to add that context that, that's still very much on the top line for us that you should expect music to be meaningfully improving with things like Marketplace playing an important role. Is this happening to you frequently? Okay. And I think you'll see us be more efficient with our marketing spend into '23. Spotify And you can see that already today where there's lots of concerts from all the big vendors being available, and we'll add more and more of inventory. CEO Daniel Ek and CFO Paul Vogel Break Down Q2 Earnings in Latest Episode of Spotify: For the Record. Admittedly, those were lowered expectations. And we took the medium and pretty much have grown overall globally now the audience by a huge margin to what was true four years ago. So, we don't go through all of them. While Spotify's current losses are harmless in the context of a balance sheet with 3.7b cash, cash equivalents, and short-term investments, 2023 will be a crucial year for Spotify to reclaim the trust of investors and demonstrate the viability of their long-term guidance for 40% gross and 20% operating margins. Like I said, we slightly outperformed in Q4, and we'll see how the year unfolds. (All three companies offer competing ways for users to stream music.) We will continue to work to build the platform of the future, and that will take investment in new opportunities that we outlined like podcasts and audio books. Spotify Until then, I'll likely pause adding to my position. I think we had said at the Investor Day that we expected Marketplace to grow at least 30% in 2022. And if you look compare to our other verticals, music and podcasting, we thought pretty much the same thing. Do you still expect 2022 to have been the peak drag from podcasts? A lot of the investments that we did in 2022 that were investments with no real sort of benefits to the revenue will start to hopefully bear fruit in '23 and beyond. And we realized, again, as I mentioned in my comments around audio books that this was a nascent space that was growing, albeit still was under consumed to what we believe the potential was in the industry. Overall, Spotify management expect margins to improve from 2023 onwards, which provides some comfort for investors. We had a great Q4 and ended 2022 strongly. However, given Spotify's rapid ascent to become the global leader in audio content and Ek's high inside ownership, I'm inclined to back him to execute and reclaim Spotify from the depths of "stock market purgatory". And I'm going to turn it now back over to Daniel for some closing remarks. Yes, I can be quick now. An interdisciplinary program that combines engineering, management, and design, leading to a masters degree in engineering and management. We finished the quarter with 205 million subscribers, 3 million ahead of guidance, thanks to broad-based strength across several regions, particularly Latin America. So far, the bears appear to be winning. But again, I think we believe we'll get the benefits of some of those moving forward into 2023, and you'll see the incremental investment slow and the benefits kind of hit in '23. It's things that we think are going to drive -- improve engagement, improve users, improve subscribers. In 2021, we said that 2022 would be an investment year, and it was. The company invests heavily in research and development to improve that playlist experience an investment it hopes will deliver advantage in a highly competitive market. It is opening up the platform so that creators have as much choice as possible in choosing whatever options they want to do. To that end, Spotify continues to invest in its advertising business. Spotifys foray into podcasting with its purchases of Gimlet and Anchor was a bit risky at the time but is now paying off, given that theres been so little innovation in podcasting, Vogel said. WebPaul Vogel, Spotify CFO, joins 'Closing Bell' to discuss the company's latest quarter and how his business differs from Netflix. Indeed, Ek's central thesis for heavily investing to build a multi-product platform is that newer products (e.g., podcasts and audiobooks) do not have the same artificial gross margin constraints as their premium music revenue. Okay. However, to be clear, this doesn't mean we're changing our strategy. Thanks, Daniel, and thanks, everyone, for joining us. Fourth, Daniel Ek acknowledged in the Q3 earnings call that the hurdle rate for new investments would increase going forward, so we should expect to see spending moderate in 2023: But I also want to reiterate that we're keenly aware that this is an uncertain time and the cost of capital has increased. The time to move is now, Digital transformation after the pandemic, Creating change through collaborative participation, allows users to see the lyrics to the songs theyre listening to, continued growth in the smartphone market. We've got another question from Doug Anmuth on marketing. Please. Mam prawo dostpu do treci swoich danych i ich sprostowania, usunicia, ograniczenia przetwarzania, oraz prawo do przenoszenia danych na zasadach zawartych w polityce prywatnoci sklepu internetowego. The number of artists that are mattering for users are increasing materially. State says changes needed. So, we had really strong Marketplace growth overall in 2022. So, net, net, I think we went from being almost nowhere four years ago to now being the leader in many markets around the world in this space. ul. Now there are more than 6,000. Despite consistent 20%+ MAU growth and a strong market leadership position, Spotify as an investment has attracted significant scepticism from investors. Sometimes it is increasing the revenue per user. So, we had kind of lowered expectations coming into Q4. And so, we feel good about that and where the tech is going, and then it's really going to somewhat depend on just how the macro rolls out over time. Next -- another question from Michael Morris. It adds the benefit that it makes our business more defensible because now it is meaningfully contributing to our advertising story. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Some of the investments we made in the back half of the year are still slightly impacting Q1. It's still early days. So, we are shifting to focus on tightening our spend and becoming more efficient. We think those will sort of continue to moderate throughout the year, which will help -- partly help gross margin. Spotify is known for its smart algorithms that create curated playlists for users based on what they already like to listen to. "We want to make our platform the de facto platform for podcasts for Spotify users," Spotify's CFO Paul Vogel said on an investor call. Yes. Paul Vogel Net Worth (2023) | wallmine And I'll let Paul fill in on more of the specific details. We feel really good about the ad stack we're building. So, the answer is yes to 2022 being the peak drag from podcast. Sometimes it is increasing our margin per user and sometimes it's all of the above. And that's the plan we're tracking consistently against. So I'd say at a high level, we still remain very confident with the margin profile and margin guidance we gave at the Investor Day. Mam prawo cofnicia zgody w dowolnym momencie bez wpywu na zgodno z prawem przetwarzania, ktrego dokonano na podstawie zgody przed jej cofniciem. $60,019. And this is true across the world, really at this point. Essentially, Spotify is a lot more complex of a business than it was several years ago. So, there's a number of things that go on there. Next quarter is unlikely to change anything material about the "stock story" for Spotify, but I'll be closely watching management's guidance for 2023 margins. And to meet this objective, we are also rethinking how we operate. Combine an international MBA with a deep dive into management science. Reconciliations between our IFRS and non-IFRS financial measures can be found in our letter to shareholders, in the financial section of our Investor Relations website and also furnished today on Form 6-K. And with that, I'll turn it over to Daniel. Vogel had no idea where Spotify was headed that day it went public, but he hoped it was somewhere exciting. During this call, we'll be making certain forward-looking statements, including projections or estimates about the future performance of the company. Excellent user growth that beat guidance, strong headline revenue growth (with some weakness under the surface for their ad business when considering currency fluctuations), but plateauing gross margins and widening operating losses. ), Norman Quack's Chophouse closes its Stillwater location, Charley Walters: Way too early to judge Vikings' pick of Jordan Addison, 'Forever chemicals' exacerbate water issues in Lake Elmo, development still on pause, 'Smiley-face killer' theorist accused of St. Paul sex assault at time of Zamlen search, Do Not Sell/Share My Personal Information, Chief Innovation Officer Tarek Tomes, $160,000, Chief Equity Officer Toni Newborn, $127,000, Chief Resilience Officer Russ Stark, $108,000, Director of Intergovernmental RelationsThaomee Xiong, $108,000, Naomi Alemseged, constituent outreach coordinator, Ikram Koliso, outgoing policy associate, will be the new college savings account program manager, Noel Nix, deputy director of intergovernmental relations and community engagement, Joan Phillips, executive assistant to the mayor, Christine Rider, senior aide to the deputy mayor. And we're going to take the last question from Rich Greenfield on competition. Spotify recently began testing a Friend's tab on the bottom strip of the app. So, while reported revenue was a touch below forecast, our organic growth on a currency-neutral basis modestly outperformed due primarily to advertising.
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