Spotify has achieved its first quarterly profit since early 2022, swinging to a €32 million operational profit in Q3, up from a €228 million loss a year prior. CEO Daniel Ek credited newfound “efficiencies” and cost-cutting for these improved margins. The music streaming giant enacted hiring freezes, staff cuts and ended projects like ‘Spotify Live’ to reduce costs. But the company also raised subscription prices for the first time ever, from $9.99 to $10.99 in the US.
Critically, this long-resisted price hike caused no noticeable rise in cancellations. In fact, new subscriptions accelerated, easing concerns over customer retention. Ek said further targeted price increases can sustain growth if additional product value offsets higher costs. To that end, they expanded into audiobooks and podcast translation powered by AI, which Ek argued boosts engagement and reduces churn. While Spotify sacrificed short-term profits to gain subscribers, its focus has now shifted to creating shareholder value through prudent financial management.
Yet risks remain if non-music diversifications like audiobooks fail to deliver profits to justify ongoing content investments. And if price hikes encourage users to switch services, Spotify could lose its competitive advantage in market share. For now, though, Ek is confident Spotify can consistently book profits, fulfilling its promise to shareholders. With tightened budgets and rationalised operations, Spotify appears to have adjusted its strategy to balance user growth with profitability. But in a shifting streaming landscape, maintaining that equilibrium long-term will require Spotify to repeatedly demonstrate its value exceeds its rising costs.
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