Shares of Spotify fell on Wednesday after the music streaming service – beset by controversy over its star podcaster Joe Rogan – forecast lower profit margins in the next earnings period as subscriber growth slows .
The company recorded solid increases in the fourth quarter in terms of monthly active users and 180 million premium subscribers, in line with previous forecasts.
But the streaming service expected its gross profit margin in the first quarter of 2022 to fall to 25% from 26.5%. And it planned to add just three million premium subscribers during that period, a marked slowdown from recent quarters.
Over the past week, Spotify has been hit by the defection of several music superstars, including Neil Young and Joni Mitchell, over its handling of Rogan’s controversial claims about Covid-19 vaccines.
Executives nonetheless touted the platform’s long-term growth potential and broadly defended their handling of the Rogan controversy, adding it was too early to know how it would affect the company’s financial performance.
Shares of Spotify fell 10.9% to $171.00 in after-hours trading.
The stock has fallen sharply over the past year, along with other “stay-at-home” stocks that have benefited from the disruptions to daily life caused by the Covid-19 pandemic.
The company posted a quarterly loss of 39 million euros ($44.1 million) as revenue rose 24% to 2.7 billion euros.
Spotify highlighted “continued momentum in our subscription business and significant advertising results”, adding that “we see a huge amount of greenfield on the horizon”.
Spotify’s statement made no mention of the Rogan controversy, while stressing that consumer trends on the podcasting platform “remain strong.”
– Too early to measure the impact –
On Sunday, chief executive Daniel Ek announced that Spotify would add a content advisory to any podcast discussing Covid-19, directing users to government health authorities and other trusted sources.
The move follows criticism from Young and other artists who left the platform after an appeal from medical professionals to stop Rogan from promoting “several lies about Covid-19 vaccines”.
On Wednesday, Young’s former bandmates of Crosby, Stills, Nash and Young said they had asked their labels to remove their recordings from Spotify.
Ek addressed the issue in his opening remarks and again in response to repeated questions from analysts.
While saying Spotify could have articulated its policy sooner, Ek said he was pleased with the company’s reaction.
“We try to balance creative expression with the safety of our users,” Ek said.
“We don’t change our policies based on a creator and we don’t change them based on a media cycle or someone else’s callout,” he said.
“Our policies have been carefully drafted with input from a number of internal and external experts in this area.”
Ek said it was “too early” to assess the impact of the Rogan controversy on his business, adding “usually when we’ve had controversies in the past, those are measured in months and not in days”.