Inflation appeared to have dashed Spotify’s hopes to become a hardware company.
Spotify has quietly stopped producing its in-car hardware device called the ‘Car Thing,’ citing inflation, supply chain disruptions, and the product’s financial viability.
The decision came shortly after the company made the product widely available in the US market in February.
The device, unveiled by the global streaming giant in April 2021, was designed to let users access their Spotify accounts to play music and podcasts via a dedicated screen.
The touch-enabled Car Thing features voice commands, allowing users to quickly access their music and podcasts by simply saying, “Hey Spotify”.
Spotify offered it in beta for a limited number of Spotify Premium users in October 2021 followed by a wider release in the US market in February of this year at $89.99.
Car Thing was ideal for vehicles that don’t have Apple CarPlay or Android Auto installed, although it still required a connection to users’ Spotify app on their smartphones.
Spotify recently slashed the price of the product by 44% to $49.99, according to its dedicated microsite for the product. The discount could mean that the device wasn’t selling out as fast as the company had hoped.
The company disclosed its decision to discontinue Car Thing in its most recent (Q2 2022) earnings report on July 27.
The move weighed on the group’s reported gross margin for the second quarter, the company said, after incurring a one-time charge of $31 million.
During last week’s earnings call, Spotify Chief Financial Officer Paul Vogel said the company’s decision to discontinue Car Thing was due to a few factors including pricing, inflationary pressures and supply chain difficulties.
“First, we tested a number of price points and we frankly haven’t seen the volume at the higher prices that would make the current product financially viable”
Paul Vogel, Spotify
“First, we tested a number of price points and we frankly haven’t seen the volume at the higher prices that would make the current product financially viable,” Vogel said, speaking last week.
“Second, rising inflation and component costs, coupled with the expanded lead time needed to order parts, has significantly altered the risk reward of continuing to lean into further product development,” the executive added.Music Business Worldwide