Elon Musk says Twitter has stabilized its finances after being close to bankruptcy, but the company still faces money problems and at least seven lawsuits alleging it stopped paying bills after Musk bought the social network. A new report says an attempt to boost Twitter Blue subscription revenue isn’t paying off much yet, and a plan to charge for API access has angered users and developers.
In a tweet on Sunday, Musk said he’s had an “extremely tough” three months because he “had to save Twitter from bankruptcy, while fulfilling essential Tesla & SpaceX duties… Wouldn’t wish that pain on anyone. Twitter still has challenges, but is now trending to breakeven if we keep at it. Public support is much appreciated!”
Musk had said on November 4, 2022, that Twitter was losing over $4 million a day. He reduced Twitter’s expenses by laying off half its staff, terminating thousands of contractors, and issuing an ultimatum that caused many employees to resign. After the cost-cutting spree, he reportedly said on a podcast in late December that “we’ve got the expenses reasonably under control, so the company’s not in the fast lane to bankruptcy anymore.”
One of Twitter’s problems is the $13 billion of debt Musk used to fund his takeover, which resulted in interest payments totaling $1.5 billion a year. Twitter made the first interest payment of about $300 million in late January to “a group of seven banks, led by Morgan Stanley, which became stuck with the debt after they were unable to sell it to outside investors,” Bloomberg wrote.
Though Twitter made the debt payment, Musk’s apparent cost-cutting strategy of not paying rent or invoices from vendors is detailed in a growing pile of lawsuits. The latest lawsuit was filed in a New York state court on Friday by Innisfree M&A, which said Twitter owes $1.9 million for “proxy solicitation services” related to the special meeting of shareholders that resulted in approval of Musk’s $54.20-per-share offer to buy the company.
Twitter Blue not a roaring success
Musk has tried to boost revenue by expanding the Twitter Blue subscription’s features and raising its price from $5 to $8 a month. But as of mid-January Twitter had just 180,000 paid subscribers in the US, less than 0.2 percent of monthly active users, The Information reported yesterday. Twitter’s worldwide subscriber total was about 290,000.
The upgraded subscription was first launched in early November and then relaunched on December 12. The first rollout was plagued by a wave of account impersonations that took advantage of Musk’s decision to make verification a paid feature.
Twitter Blue revenue could still grow significantly as the upgraded version hasn’t been available very long. But as of now Musk has “focused a lot of attention on a product with a relatively poor payoﬀ, even as his erratic decisions as Twitter’s CEO have caused a drastic drop in advertising sales, which makes up the majority of the company’s revenue,” The Information wrote.
“All together, the global number of subscribers would equate to around $28 million in annual revenue—less than 1 percent of the $3 billion Musk has said Twitter aims to make in revenue this year,” the report said. Musk told Twitter employees in a November email that “we need roughly half of our revenue to be subscription.”
While individuals haven’t been flocking to Twitter Blue for $8 a month, Musk hopes businesses will be willing to pay much larger sums. One plan that hasn’t yet been finalized would require businesses to pay “$1,000 a month to keep their Gold verification badges, plus an extra $50 per month for each account affiliated with the business,” The Information report said.