Spotify Plays Moneytalks on Repeat
Spotify has started the year on a flat note, and investors are singing the same old tunes. ‘I Need a Dollar’ by Aloe Blacc, Jay-Z’s ‘Hard Knock Life’, and ‘Ain’t Nothing Going On But The Rent!’
Spotify never intended to be a non-profit, but that’s the way things have turned out. The music streamer generates $6.1 billion each year through ads and premium account upgrades. However, most of that becomes royalties for record labels.
Shares have gone nowhere since their direct listing in 2018, and investors’ patience is running thin. After all, it doesn’t matter if you’ve revolutionized an industry. If can’t print black numbers, there’s not a space for you (Darwin et al., 1859). Eventually, investors will price that in.
Luckily, the Swedish tech giant has come up with a new plan to make money! Since music became institutionalised, extra-large checks have been written to market songs and place albums on billboards, television, and radio. It’s a cost of doing business, and now Spotify thinks it has the online real estate to compete for some of those marketing dollars.
The Stockholm-based company has ploughed hundreds of millions into podcasts which now compete for listeners’ time. There’s more pressure on publishers, and industry experts see a keen interest from artists in front-page placement. Watch out for an arms race between mega labels, all bidding for big exposure on behalf of those clients.
This kind of monetization potential could quickly get the stock surging. However, investors know Spotify’s past all too well. They’re expecting industry pushback. A bidding war would price out smaller Indy labels, and artists like Taylor Swift have already taken to the courts for royalty protection.
The Invstr community is 8% short-sold on the name, slightly less than the rest of Wall Street. Spotify has some convincing to do yet, but we’re listening!