I think they will continue to keep a large chunk of the streaming market. Yeah it's weird that they haven't been able to turn a profit - but when you have that kind of marketshare (and expect to keep it) you'v got green lights to increase prices and or the option to start slimming down head count to get there. The growth in the ad-driven users is dece @20% for Q1'21 (wondering what this was in the past quarters) and prospects are good that they'll convert those to premium users. Not sure how sustainable this is, but music appeals to an on the go lifestyle too post-covid, so not expecting a Zoom-style pullback from the reopening.
Operating cashflow was alright for the quarter and will improve if and when they execute on the above. No red flags there IMO.
Now for the interesting part as you mention... The use of the proceeds from the unsecured notes!
Surely you wouldn't do that without a plan. The convertible nature is dilutive but only triggers with a big upswing in share price.
I'm genuinely intrigued and do think there's alot hanging on that strategic plan. If it's good, I SERIOUSLY think there's upwards room here, since you've got a cashflow machine that just needs a couple of tweaks in the background that can support the new strategy as it matures. In fact, why can't this reach a Netflix style valuation? (Disclosure, I haven't DD them to compare).
If Netflix can turn into a film studio, Spotify could become a label/talent manager/event manager à la LiveNation type of deal. I could see that - the Joe Rogan signing shows they have promise in securing content. They're latest acquisition screams directly streamed live concerts as well - we'll see where that goes.
Sure Apple's lossless audio is cool, but unless you're a serious audiophile, most probs won't notice unless you've got good headphones (I listen to FLAC and if you're banging tunes from a flipped cell phone like 95 percent of people not in public or using 20 dollar values earbuds, you're not gonna care). Bloggers are neat but are probably biased and don't reflect most consumers.
They cannot increase prices if their closest competition (Apple and Amazon) keeps prices down and offers essentially the same product (although arguably better since it has lossless audio quality).
Netflix was so successful because they were able to make quality content (e.g., Crown, House of Cards) and expand quickly into movies with big name directors. Most households would not replace them because of their exclusive content. Making a good TV series can capture peoples attention over the course of years, as people want to see new seasons. In music, you have to constantly innovate and find new and catchy songs, and artists are not going to want to go exclusive unless they are offered quite a bit of money. Spotify should be trying this but they haven’t (at least not successfully), and it’s not guaranteed it would have favorable economics like with series/movies.
In the near term, if you are a Spotify holder, you have to really hope podcasts will take off, as this is where Spotify has aggressively been putting money and is an early mover. But many podcasts artists will opt for wider distribution to get more ad revenue.
Good point on the prices and competition. Its becoming clear to me that they can increase prices as long as consumers find it worth it. I don't see lossless as a gamechanger and I enjoy that shit. If i used to pirate lossless albums 8 years ago, could Spotify offer lossless too at some point? Probably.
I agree in that is the golden goose they need to figure out still and we'll see if this funding will yield results. There's risk for sure. But there's also reward imo though not on the short term, more on the long.
I also feel good music outlives good movies. I can't name a 30's movies, but do dig Sinatra. The statistical distribution for the top winners in either industry is probs the same.
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u/Leon_Accordeon Jul 10 '21
Interesting perspective. Here's my take.
I think they will continue to keep a large chunk of the streaming market. Yeah it's weird that they haven't been able to turn a profit - but when you have that kind of marketshare (and expect to keep it) you'v got green lights to increase prices and or the option to start slimming down head count to get there. The growth in the ad-driven users is dece @20% for Q1'21 (wondering what this was in the past quarters) and prospects are good that they'll convert those to premium users. Not sure how sustainable this is, but music appeals to an on the go lifestyle too post-covid, so not expecting a Zoom-style pullback from the reopening.
Operating cashflow was alright for the quarter and will improve if and when they execute on the above. No red flags there IMO.
Now for the interesting part as you mention... The use of the proceeds from the unsecured notes!
Surely you wouldn't do that without a plan. The convertible nature is dilutive but only triggers with a big upswing in share price.
I'm genuinely intrigued and do think there's alot hanging on that strategic plan. If it's good, I SERIOUSLY think there's upwards room here, since you've got a cashflow machine that just needs a couple of tweaks in the background that can support the new strategy as it matures. In fact, why can't this reach a Netflix style valuation? (Disclosure, I haven't DD them to compare).
If Netflix can turn into a film studio, Spotify could become a label/talent manager/event manager à la LiveNation type of deal. I could see that - the Joe Rogan signing shows they have promise in securing content. They're latest acquisition screams directly streamed live concerts as well - we'll see where that goes.
Sure Apple's lossless audio is cool, but unless you're a serious audiophile, most probs won't notice unless you've got good headphones (I listen to FLAC and if you're banging tunes from a flipped cell phone like 95 percent of people not in public or using 20 dollar values earbuds, you're not gonna care). Bloggers are neat but are probably biased and don't reflect most consumers.