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Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland break down Spotify's latest earnings report.
MYLES UDLAND: All right, let's talk about another name that we discussed quite a bit this morning. That is Spotify. Shares are under just a little bit of pressure this morning after their latest report. A slight miss actually here on the top line for Spotify also, or rather, a narrower than expected loss. So it'd be there on the bottom line.
But really, Sozzi, the story here is about listening hours and what's happening with the company's investment in the podcast space, right? And that has been significant over the last couple of years. They called out the strength they're seeing in Joe Rogan. They've got the Obama-Springsteen podcast on there with the mention. But shares under pressure, off about 8% here.
BRIAN SOZZI: Yeah, and I know-- I'll quickly run down the numbers here because I know you want to maybe perhaps take me to task for my views on podcasting. We were just tweeting about this, this morning. But nonetheless, I think why you're seeing Spotify, the sell-off accelerate here in the premarket, total monthly active users, 365 million, up 24% year over year, but below Spotify's internal expectations. Also, the premium avenue-- average revenue per user or the metric that is referred to as RPU, down 7% year over year.
And I think these are not necessarily bad numbers for Spotify. They did beat in a lot of their estimates in other areas in the quarter. But, again, this is another tech stock that has been priced for perfection. And perhaps there was a couple of holes in the quarter. Also, CEO and founder Daniel Ek mentioning in prepared remarks in their conference call a little bit of a slowdown in some emerging markets during the quarter. So, something to pay attention to.
JULIE HYMAN: I just wonder when it comes to podcasts, I have to wonder about the ROI, right? 2.6 million podcasts, what? Like, how much is that costing the company? If only a quarter of all of their premium users are actually listening to the things, like, why make such an enormous investment, especially when how much of that traffic does Rogan account for alone? You know, I just-- I'm just confused by that strategy.
MYLES UDLAND: Well, I think the thing with podcasts is-- and Spotify has been clear on this for a number of years now. It seems superficially like an oversaturated market. How many podcasts could there possibly be? How many people are out there listening to podcasts? But if you look at what Spotify has done with Anchor, which means the three of us could-- I could open the app, and the three of us are recording a podcast right now, put it up to Spotify. Boom, there you go, 2.6001 million podcasts now are out there on the platform.
This week, they also announced they're going to make it easier for folks on the platform to monetize their podcasts. And I think they've been clear about the strategy. And we can debate whether it's going to work. And I think the Street this morning is having its questions about it. But the average or, like, the overall listening time, the amount of time you're spending on the app, is going to increase and does increase for its podcast users. People who listen to podcasts in general spend more time on Spotify in general than people who do not.
And Sozzi, I think the reason that I took your comment this morning, which was-- what are they-- 2.6 million podcasts, you think I listen to 2 and 1/2 million of them. There's still this weird view that people who listen to podcasts are, like, always listening to podcasts. That's all they do, is listen to podcasts. Like, I don't regularly listen to more than a couple. And it's basically just a replacement for the sports talk radio I listened to when I was a kid. You know, WAFN. I mean, like, it's basically just a replacement for that because I use Spotify to fill my idle time or when I need a distraction and I don't really want to pay attention to something.
So I think that they view podcasting as-- I mean, they talk about ear share. And they talk about the whole market opportunity as all of audio. Anything that is audio is their market. So I think that's the strategy. Again, the Street this morning is doubting it. But I don't think it's so crazy, I guess, to be going all in on podcasting, especially when it's a different kind of relationship with the content creator than it is dealing with a record label. We all know that.
BRIAN SOZZI: So 1 and 1/2 million a day, not 2 and 1/2.
MYLES UDLAND: Sure, you can use 1 and 1/2. 1 and 1/2 million a day is the number of podcasts I'm listening to.