Why isn’t Spotify profitable yet? The company’s chief financial officer Paul Vogel has been reiterating its growth-over-profits strategy in Spotify’s own ‘For The Record’ podcast.
“Obviously we think we’re in the still early days of growth: user growth, subscriber growth, new market growth, product growth. So we think there’s a huge opportunity for us to continue to expand,” he said.
“We do believe we’re in a market share game right now, and that’s really important… And if we wanted to, we could obviously manage the business to show, y’know, an income statement of profitability if we wanted to. But we wouldn’t be investing as aggressively in content or R&D, all the stuff we’re doing around AI and machine learning.”
Vogel suggested that by keeping up its pace of investment, Spotify is setting itself up for “long-term success”. “The third thing, which shouldn’t be lost, is we’re free cash-flow positive, which we think is a great place to be in in terms of continuing to run and grow the business,” he continued.
“And then fourth, we feel really good that we’re adding users and subscribers that will add long-term value to Spotify. Our LTV – our [customer] life-time value to our SAC, which is our subscriber acquisition costs, has been hovering between two and a half and three times, which is a pretty good number, and we feel really good about that.”
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