Lowering costs is another reason Spotify likes podcasts. Spotify doesn’t expect to lower record labels’ share of its sales in these talks, as it did the last time, Chief Financial Officer Barry McCarthy said in an interview.

Spotify is in the midst of negotiating new long-term contracts with the three major record labels, its biggest suppliers.

One reason may be that Spotify doesn’t expect to get much relief from music companies. “Why are they guiding to such low gross margins?” “This is not about the fourth quarter, it’s about the guidance,” said Anthony DiClemente, an analyst who tracks the company for Evercore ISI. Investors have been upbeat about Spotify’s prospects, sending the stock up 23 percent this year. Spotify also said its average revenue per user had fallen by 7 percent. The company’s shares sank as much as 8.9 percent to $127.05 in premarket trading Wednesday because the company forecast lower profit margins in the coming year. Margin Concernsīut investors were more concerned about Spotify’s projections for 2019. Spotify grew its user base by nearly 30 percent last year despite growing competition from Inc., Apple and Alphabet Inc.’s YouTube.

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