Spotify (SPOT) has eliminated its live audio initiative, Spotify Live, as the music streaming giant looks to slash costs and improve margins.
The company, which began scaling back its live audio programming last year, confirmed the news in an email to customers late Tuesday afternoon, writing: "The Spotify Live app will shut down on April 30, 2023. You can still join any rooms or artist events until then. We’re excited to bring more live events to Spotify in the future. Stay tuned!"
The shutdown is the latest sign of trouble within live audio after the pandemic initially boosted consumer demand for those types of services. Clubhouse, which shot to fame in early 2020, has seen monthly active users sink by 82%, according to Sensor Tower date, cited by The Verge.
It's a stark fall from grace as Clubhouse was valued north of $4 billion at the height of its popularity in 2021.
That success prompted Spotify to purchase Betty Labs for more than $60 million in 2021 as the platform hoped to capitalize on the live audio boom. The acquisition helped create Locker Room, which was eventually rebranded into Spotify Live.
Yet the service was unable to attract the same level of attention as its competitors: "I assume [the shut down] was related to lack of consumer interest and cost savings," Pivotal Research analyst Jeff Wlodarczak wrote in an email to Yahoo Finance.
Cost savings remain paramount for the company following hefty podcast investments, which have been a significant drag on margins and profitability.
To date, Spotify has spent $1 billion pushing into the podcast market, signing on celebrities like the Obamas, Prince Harry, and Kim Kardashian. The company paid $230 million to acquire podcast studio Gimlet in 2019. Spotify then paid a reported $200 million to bring Joe Rogan exclusively to the platform, and another $200 million for The Ringer in 2020.
Spotify CFO Paul Vogel said during the company's investor day the platform will look to improve its profitability beginning in 2023 on a gross margin and operating income basis, categorizing 2022 as a "peak investment year." Earlier this year, the company announced a reorganization focused on "efficiency" and laid off 6% of its workforce.
On top of those cost cutting initiatives, Spotify has continued to grow its user base — a strong catalyst for recent analyst and investor optimism.
The platform revealed it crossed 500 million monthly active users (MAUs) and detailed key changes to its user interface during its second-ever Stream On event last month.
"We expect SPOT to outperform expectations on margin expansion over the next ~18 months," Wells Fargo analyst Steve Cahall wrote in a new note to clients this week. "Investors expect a price increase, but we think the follow-through will be better structural margins (we'd be buyers if folks 'sell the news')."
Cahall, who reiterated his Outperform rating and $180 price target, said he expects price increases to hit the platform "in the coming months" following price hikes at both Apple Music (AAPL) and Amazon Music (AMZN).
"We think price negotiations with music labels are predicated on a stronger margin profile for SPOT, and that's why said increases are taking longer," the analyst said. "The follow-through commentary is what we're playing for."
Still, Cahall warned if Spotify can't deliver on its guidance of sequential margin improvement this year, investors "will lose patience in the stock as a self-help story."
Spotify stock is up a whopping 66% year-to-date, but still down more than 15% on a year-over-year basis.
Alexandra is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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