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The Ledger: Earnings Season Starts Next Week — What to Watch For

All eyes should be on Spotify, a bellwether company for the streaming-driven music business.

Earnings season kicks off next week with fourth-quarter earnings releases by SiriusXM on Tuesday and Spotify on Wednesday. Warner Music Group (Feb. 8) and Eventbrite (Feb. 10) are slated for the following week.

All eyes should be on Spotify, a bellwether company for the streaming-driven music business. We know roughly what Spotify will report based on previous guidance: revenue from 2.54 billion to 2.68 billion euros, monthly active users from 400 to 407 million, and subscribers from 177 to 181 million. Investors could ding Spotify’s share price if its numbers are on the low end of those ranges. The high end of Spotify’s fourth-quarter guidance would represent a 9 million-subscriber gain — its highest of the year but 2 million lower than the 11 million added in each of fourth quarters the previous two years.


But looking forward is more important than looking back at past performance. The real numbers to watch are Spotify’s guidance for the first quarter and full-year 2022 and the implied growth in those forecasts. Solid 2020 and 2021 growth means expectations are understandably high this year. First-quarter subscriber growth is historically some of the lowest in any year: in 2021, Spotify added 3 million subscribers in the first quarter compared to 7 million in both the second and third quarters. If guidance is perceived as too low, some people might wonder if Spotify will follow the path of high-profile stay-at-home companies — such as Netflix, Zoom and Peloton — whose stocks initially benefitted from changes in how people worked, exercised and were entertained during the COVID-19 pandemic.

The world has changed since March 2020, but maybe not as much as people expected a year ago. Stay-at-home stocks have disappointed after investors mistook temporary changes in consumer behavior for permanent shifts in how people work and live. That partly explains why Netflix’s stock sank nearly 30% in the three days following its underwhelming forecast for first-quarter subscriber growth of 2.5 million, less than half of Wall Street’s expectations and about a third lower than its subscriber additions a year earlier. It’s partly why Peloton shares have cratered, the company dropped prices and sales forecasts were lowered (supply chain problems also contribute to the stock’s woes). Companies would be wise to temper expectations. In fact, Spotify has done just that. Throughout 2021, the company peppered its guidance with phrases like “subject to substantial uncertainty” to emphasize the difficulty in making projections during a historical anomaly.

Even if people spend less time at home, Spotify won’t necessarily encounter the same problems as stay-at-home stocks. Peloton is a unique situation because online subscriptions are driven by purchases of expensive hardware. Netflix and Zoom depend greatly on people being home. Mobility has always been a prime factor in adoption of music subscription services. Radio listening is likely to grow if people spend more time commuting to offices, but Spotify can make the transition since most cars have by now incorporated connectivity to streaming services.


Stock Spotlight:

Through Jan. 28, the % change over last five trading days and year to date.

Warner Music Group: +5.4%, -4.4% YTD
Spotify: -17.1%, -26.1% YTD
SiriusXM: +3.0%, -2.5% YTD
iHeartMedia: +8.8%, -2.9% YTD
Eventbrite: -8.4%, 25.2% YTD
NYSE Composite: +0.0%, -4.5% YTD
Nasdaq: +0.0%, -12.0% YTD

The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers.

UPDATE 9:30 AM EST, Feb. 1 2022: This article has been updated with corrected dates for Spotify and SiriusXM earnings reports.