Spotify CEO Daniel Ek says he expects the company to hit $100 billion in revenue a year over the next 10 years.
The prediction came at the end of a tough Investor Day 2022 discussion in which the cost of Spotify’s podcast and audiobook expansion was revealed. It was the company’s first investor day since it went public in 2018. Ek hopes to inspire Wall Street’s confidence in Spotify by becoming a media empire beyond just music streaming.
“From everything I see, I think that over the next decade we will be a company that generates $100 billion in revenue a year and achieves a gross margin of 40% and an operating margin of 20%. “, Daniel Ek told investors on Investor Day 2022. But to achieve this goal, Spotify would have to increase its revenue by 10 times compared to its revenue of $ 11.4 billion in 2021.
“Spotify will come up with these pretty bold goals and we’re going after them because that’s how we see the world and we’re going to invest behind that,” Ek continued. Wall Street appeared to react well to the upbeat forecast, with Spotify shares rising 6.5% after losing more than 50% of its market value so far in 2022. The precipitous drop is worse than the overall market decline in 24% in communication services. S&P 500 sector.
Daniel Ek also pointed out how the company’s focus on podcasts and audiobooks has cost it long-term goals. Dawn Ostroff, Spotify’s chief content officer, said the company has committed more than $1 billion to podcasting. He expects podcast revenue to grow from the $215 million it brought in in 2021. Ostroff said she thinks podcasting is a $20 billion opportunity for Spotify.
Meanwhile, Daniel Ek shared that he believes podcasts have the potential to generate margins between 40% and 50%. He also expects audiobook margins to be over 40%, but he didn’t share a timeline for hitting those numbers. CFO Paul Vogel shared the reality of Spotify’s current position in podcasting. Spotify’s podcasting business recorded a negative gross margin of -57%. He also shared that the losses will be even higher in 2022.
Spotify’s strategy with podcasting uses exclusive shows like ‘The Joe Rogan Experience‘ to attract listeners. He paid Joe Rogan over $200 million for that exclusive deal, while Spotify paid over $60 million for Alex Cooper’s’call her daddy‘ exclusivity of podcasts.