Spotify chief executive Daniel Ek has sought to distance his company from Netflix, telling investors the two are “vastly different businesses”, after the recent crash in the video streaming service’s stock price sliced Spotify’s value by a fifth.
“I think a lot of people are grouping us and Netflix together . . . despite both being media companies and primarily subscription revenue companies, that’s kind of where the similarities end for me,” Ek said on Wednesday.
“With Spotify we are a platform, Netflix is not. With Spotify we have a free service, Netflix does not . . . it’s vastly different businesses,” he added.
Shares in the music streaming service have dropped nearly 20 per cent since Netflix revealed its subscriber growth had stalled, fuelling fears over the business model as inflation soars.
Although Ek is demurring from comparisons with Netflix, Spotify has in the past tried to convince investors it could imitate the path of Netflix, which has been one of the most successful stocks of recent years.
Spotify hired Barry McCarthy, Netflix’s former chief financial officer, to lead it through a public listing. He has often compared Spotify to Netflix, telling investors that the music streaming group “reminds me of my first 10 years at Netflix” and likening Spotify’s podcast push to Netflix’s initial move into streaming video.
Spotify’s stock has dropped more than 50 per cent this year. The company has been hit by macroeconomic concerns over inflation and the war in Ukraine, as well as a fundamental reassessment of streaming as a business model. The group’s market value has shrunk to $21bn, a third of its size during its pandemic highs last year.
However, chief financial officer Paul Vogel said he had not seen any indication that the macro environment was affecting its numbers. “We definitely think Spotify is a product that people want to continue to have,” he said. “Any uncertainty whether its war or macro, it’s always going to be there.”
The company added 2mn subscribers in the first three months of the year, even as it lost customers after shutting down in Russia and despite protests against the service over podcaster Joe Rogan and misinformation regarding coronavirus vaccines.
The group reached 182mn paid subscribers and 422mn total users by the end of March. During the quarter, Spotify stopped billing subscribers in Russia because of its attack on Ukraine, which the company last month warned would cost it about 1.5mn subscribers.
Spotify predicted it would add 5mn subscribers in the three months to the end of June, accelerating again despite an expected additional loss of 600,000 subscribers in Russia. The company’s first-quarter revenue rose 24 per cent from the same period a year ago to €2.7bn.
Spotify’s shares are down more than 12 per cent by mid-afternoon in New York.