News & Analysis

Dive Into a Music Streaming Giant

18 August 2022 By GO Markets


By now Spotify is hugely synonymous with providing music to the masses. We have all either, in one shape or form, listened to a song on Spotify or a podcast. They are not strangers to us, but somehow, we may overlook them when it comes down to making investments, but that could well change, if the future plans of the corporations are achieved. Let’s take a further look and see how they are performing lately.

Spotify Technology SA (NYSE:SPOT) $120.10 USD

Spotify has a home in literal millions of households worldwide. Its most recent quarterly report, delivered at the end of July, counted more than 433 million monthly active users, which counts for 19% year-on-year growth vs the same quarter in 2021.

Not all of these listeners are into music, though. Podcasts are also a really big deal for Spotify, who released 100 new and exclusive titles in the second quarter, including Batman Unburied which is a 10 episode audio drama. Lets not forget the opinion-split Joe Rogan show, which received numerous calls to be deplatformed by angry customers who didn’t agree with how the show is ran. However, it remains increasingly popular so the show stays for now amid anger from certain artists threatening to remove their content from the platform. This hasn’t stopped Spotify from performing well financially and their growth seems like is here to stay.

For instance, if you’re a Spotify listener you’ve generally got two options: listen to the adverts or pay not to. If you listened to the ads last quarter (ending June 30th), it helped Spotify to earn 360 million euros during that time. If you paid to not have to listen to the ads last quarter (ending June 30th), it helped Spotify earn 2.5 billion euros during that time. Together, this revenue growth added up to a 23% quarterly revenue increase vs the year before.

But they are not sitting on their laurels, at the latest Spotify 2022 Investor Day, management revealed that they expect to generate $100 billion in revenue (10 times more than last year’s revenue), a gross margin of 40% and a 20% operating margin over the next decade.  They will do this through new services (helping artist marketing), products and verticals to drive more meaningful user, revenue, and bottom-line growth given the music-streaming is a low-margin and highly commoditised business.

They are also massively targeting Podcasting and Audiobooks to make the platform a multimedia giant. This and the well performing advertising side of the business will see that Spotify evolves from a music-streaming service to a multi sided, audio platform and remain a big player in the industry.

Spotify rose 1.4% last week (8th-12th August 2022).

Source: Spaceship, Yahoo Finance, Google.

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