Spotify (SPOT) is Playing the Long Game

July 2, 2021

Spotify (SPOT) is Playing the Long Game

As consumer behaviors normalize, so are levels of music streaming activity. However, one platform is showing comparative strength: Spotify.

Spotify is a peer leader in recent demand growth: +6% QoQ. Apple Music (housed inside of the iTunes brand) has dropped -10% QoQ, with Sirius XM and Pandora trailing further behind.

Spotify's 21Q2 ended on June 30. Demand growth was fairly flat YoY, but +40% higher vs 2019.

What is helping to drive Spotify growth long-term?

1. Spotify is winning the Podcast battle vs. its top peer Apple Music in total volume and YoY growth. It also outperforms the generic trend of listening to podcasts, displaying YoY weakness.

Spotify is focused on keeping top podcast talent by enabling access to paid audio products on top of Spotify and giving creators control of content and monetization.

The monetization of podcasts for Spotify is a long game:

"For the next two years, being a part of this podcast creator program will be free for podcasters, meaning they can pocket 100% of their subscriber revenue, excluding payment transaction fees. Starting in 2023, Spotify says it plans to introduce a 5% fee for access to the monetization tool."

2. Spotify has mastered personalization.

Each year, one of the highest mention volume dates for Spotify revolves around its individualized "Wrapped" analysis. The element of new music discovery is commonly touted in tweets.

If Spotify can continue to build momentum vs. peers and maintain dominance in the Podcast space, it could present a long-term opportunity for investors.

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