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Wednesday Feb.01, 2023
🎵 Spotify’s profitless pod boom
The end of the pod-palooza era? (Cindy Ord/Getty Images)
Hey Snackers,
We know you love Snack Facts. So in honor of Black History Month, we'll be featuring facts and stories covering the intersection of race, finance, and the economy. Have a fact to share? Hit us up on Twitter at @RobinhoodSnacks.
Stocks spiked yesterday after some strong earnings, and the S&P 500 closed out its best January since 2019. Now, all eyes are on the Fed, whose expected rate announcement today should give clues about future policy.
Unpod
Spotify adds record users, but the “growth at all costs” pod-palooza could be dead
When shuffle plays your fave song… Bingo. Spotify shares popped 12% yesterday after the Swedish streamer reported expectation-beating quarterly revenue and upbeat user growth. Spotify had its largest spike ever in monthly active users, with listeners up 20% to a whopping 489M. Ad-free paid subscribers jumped 14% to 205M.
- Spotify’s top line looks great. Its bottom line, not so much. Despite its green logo, Spotify is still deeply unprofitable, and last quarter its losses widened to $250M.
Put it on mute… Spotify said its big growth was driven by podcasts. But big pod investments have also fueled big losses. ICYMI: Spotify has splurged $1B+ on pod-related purchases like The Ringer and Parcast, plus exclusive shows like “The Joe Rogan Experience” (reportedly for $200M+) and “Call Her Daddy” (reportedly for $60M). Pricey pod-vestments fueled growth, but also burned a hole in Spotify’s pockets.
- Spotify laid off 600 employees last week in a reorg that included the exit of its chief content officer, Dawn Ostroff, who was at the helm of huge pod deals.
- End of the pod-palooza? Spotify execs vowed that 2022 was the year of peak losses (read: they’ll try to get closer to profitability from now on).
- On the mic: CEO Daniel Ek said that pods have been a drag on profit margins and that some shows haven’t performed as well as expected.
“Growth at all costs” comes at a cost… and many aren’t willing to pay it anymore. In this uncertain economy, the focus has shifted from supercharging growth to cutting costs and maximizing profits. Ek summarized it thus: “You go for growth first and then you seek efficiency. Generally, you will see us focus on efficiency… not just growth at all costs.”
Combo
McDonald’s posts tasty growth as inflation-friendly prices and cult faves spark a fast-food frenzy
Waiting 30 mins for the McRib… worth it. McDonald’s served up hearty earnings after more fast-food lovers headed to the Golden Arches last quarter. McD’s same-store sales in the US jumped 10%, thanks in part to the “farewell tour” of its cult fave McRib. Abroad, same-store sales spiked ~13% — and make up over half of all quarterly revenue — thanks to stronger demand in countries like the UK, France, and Germany.
- Nugget nostalgia: McD’s “adult Happy Meal” promo drove the highest weekly digi-transactions ever in the US. Half of the meals sold out in the first four days.
- Deep-fried footprint: While McD’s execs expect a “mild to moderate” recession this year, they still plan to open nearly 2K new restaurants — 100+ more than they had forecast last year.
Unwrapping deals… Inflation’s finally cooling, but many consumers are trading down from full-service restaurants as budgets stay tight. Nearly a quarter of consumers say they’ve turned to fast-food since it can sometimes be cheaper than cooking at home. But not all combos are created equal:
- Fancy fries: Menu prices at rivals like Chick-fil-A and Taco Bell rose about 15% from 2021 to last year, while Wendy’s prices soared 35% in the same period.
- Slow rise: McDonald’s — which actually decreased prices 5% — said that while lower-income consumers are ordering less, they’re returning more frequently than in previous quarters.
Consistency is king… but surprise is queen. McDonald’s has been relatively consistent with its low prices and classic McMenu items, but it has also sprinkled in spontaneity with buzzy promos. While rivals have leaned on higher prices to raise revenue, McD’s leans on cult faves and fresh tastes to juice demand. Last year, McD’s celeb-inspired meal collabs with stars like Travis Scott, BTS, and J. Balvin were key in driving digital sales.
DEFI(NE)
Heard on the Block: "ordinals"
🖊️ Like taking a Sharpie to a digital dollar bill…
The OG crypto is playing catch-up. A recent addition to bitcoin lets people add text, images, or video to individual “satoshis” (think: the smallest unit of BTC). It essentially creates bitcoin-native NFTs. Dubbed "ordinals," the new protocol and its on-chain digital artifacts have sparked a mini controversy, with some in the crypto community saying they'll drive up transaction fees.
What else we’re Snackin’
- OhSnap: Disappearing-message star Snap reported disappointing earnings, sending its stock down after hours. With #s that neither crackled nor popped, the biz blamed macro conditions (which it expects to continue).
- GameSet: Match Group was feelin' the love last quarter, saying it made a profit (but still came in below expectations). The dating-app conglomerate, which owns Hinge, said it would launch a premium tier dubbed HingeX.
- Gassy: The oil boom’s still pumping: Exxon raked in a ginormous $56B profit last year, the largest ever reported for a Western oil company — and equal to $6.3M/hour. Meanwhile, BP said gas demand will plunge by 2050.
- Chevy: GM shares surged after it crushed earnings expectations and delivered an upbeat annual forecast. Even as carmakers rebound from years of record-low inventories, GM said strong demand is keeping supply tight.
- Lushoe: There’s trouble in the athleisure world: Nike is suing Lululemon, saying that at least four of Lulu’s shoe models infringe its patents. Nike said it has suffered “irreparable injury” from the sneaker sales.
Wednesday
- Black History Month begins
- Earnings expected from Meta, Align Technology, and Novartis
Authors of this Snacks own bitcoin and shares of: GM, Snap, Match and Exxon
ID: 2713212
