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Spotify:Quarterly Results/2024 Q3: Difference between revisions
Spotify:Quarterly Results/2024 Q3 (view source)
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* Buy, $399->$438: Rosenblatt said Spotify has a lot of "good new tailwinds". However, they think that since the shares are up 98% year-to- date, a "near-term reset might present an opportunity"<ref>https://thefly.com/permalinks/entry.php/id4000025/SPOT-Spotify-price-target-raised-by--at-Rosenblatt-heres-why</ref>. | * Buy, $399->$438: Rosenblatt said Spotify has a lot of "good new tailwinds". However, they think that since the shares are up 98% year-to- date, a "near-term reset might present an opportunity"<ref>https://thefly.com/permalinks/entry.php/id4000025/SPOT-Spotify-price-target-raised-by--at-Rosenblatt-heres-why</ref>. | ||
=== There are few surprises on Q3 print === | === There are few unexpected surprises on Q3 print=== | ||
* Overweight, $440->$490: Keybanc said there are few surprises on Q3 print, outside of social charges and FX. They pointed out that bundling adoption seems to be going on well. They also highlighted that consensus gross margin and operating margin for Q4 and through 2025 continue to look low. However, they think that the product cycle and moderating competitive landscape supports at least 15% annual growth revenue and operating margin of 15% by 2026<ref>https://thefly.com/permalinks/entry.php/id3998984/SPOT-Spotify-price-target-raised-by--at-KeyBanc-heres-why</ref>. | *Overweight, $440->$490: Keybanc said there are few surprises on Q3 print, outside of social charges and FX. They pointed out that bundling adoption seems to be going on well. They also highlighted that consensus gross margin and operating margin for Q4 and through 2025 continue to look low. However, they think that the product cycle and moderating competitive landscape supports at least 15% annual growth revenue and operating margin of 15% by 2026<ref>https://thefly.com/permalinks/entry.php/id3998984/SPOT-Spotify-price-target-raised-by--at-KeyBanc-heres-why</ref>. | ||
===Spotify continues to increase prices=== | |||
*Outperform, $400: Wolfe Research said that they believe Spotify secretly increased prices in Canada, New Zealand, and Ireland, effective October 2. They based their argument on pricing list at Spotify's website and a blog post in Canada. They expect this price increases to provide a tailwind in Q4 gross margin. The firm also expects Spotify's tiering strategy in these markets to be similar to that of U.S where cheaper “music-only” tiers are only available at the pre-price hike level<ref>https://www.tipranks.com/news/the-fly/wolfe-says-spotify-price-increases-should-provide-tailwind-to-q4-gross-margins</ref>. | |||
===Spotify's market share remains solid=== | |||
*Outperform, $420->$460: On August 28, Evercore said their analysis of their 12th annual U.S. and 7th annual UK Online Music Surveys (each with 1,300 respondents) established that Spotify continues to lead the music streaming industry in the U.S and U.K and that this lead keeps growing. Evercore said user satisfaction remains robust even after the recent price increase. It added that Spotify's users have exhibited less price sensitivity compared to that of its competitors<ref>https://www.investing.com/news/company-news/spotify-price-target-raised-to-460-from-420-by-evercore-isi-93CH-3591965</ref>. | |||
==Developments during the quarter== | |||
== | ===Pricing, costs and competition developments=== | ||
=== | ====Audiobook launch in more European regions==== | ||
*On October 24, Spotify announced the launch of audiobooks in premium in France, Belgium, the Netherlands, and Luxembourg<ref>https://newsroom.spotify.com/2024-10-14/audiobooks-launch-france-belgium-netherlands-luxembourg/</ref>. | |||
*This comes one year after Spotify introduced audiobooks in premium in the U.S., Canada, U.K., Ireland, Australia, and New Zealand. | |||
*Audiobooks in premium is where Spotify offers free 200,000 audiobooks to premium subscribers<ref>https://newsroom.spotify.com/2023-10-03/audiobooks-included-in-spotify-premium/</ref>. | |||
==== | ====YouTube Music increased prices in Europe and other regions outside U.S.==== | ||
* | *At the end of September, Reddit users reported that they had received a notification from YouTube saying that prices will increase by up to 40% in Europe, Middle East, South America, and Southeast Asia, effective November 4<ref>https://www.musicbusinessworldwide.com/youtube-music-gets-more-expensive-as-users-in-16-countries-report-major-price-hikes-for-youtube-premium/</ref>. | ||
*The Reddit users were disappointed with this price increase. Some wrote that they will cancel their subcriptions. | |||
==== | ====Spotify introduced basic plan tier==== | ||
* | *On June 24 2024, Spotify introduced a basic plan tier in U.S. priced at $10.99. The tier doesn't not include audiobook listening time<ref>https://newsroom.spotify.com/2024-06-21/more-choice-for-us-subscribers/</ref>. | ||
*The basic plan tier came three months after Spotify launched an exclusive audiobook tier in U.S. priced at $9.99<ref>https://newsroom.spotify.com/2024-03-01/spotifys-new-audiobooks-access-tier-gives-booklovers-more-listening-options/</ref>. | |||
==== Spotify | ====Spotify increased prices in U.S.==== | ||
* On June | *On June 3 2024, Spotify announced that it was increasing prices again in U.S. The individual plan will see an increase from $10.99 to $11.99 while the premium plan will increase from $16.99 to $19.99 per month. On the other hand, the Duo plan rose from $14.99 to $16.99. The student plan stayed unchanged at $5.99 per month<ref>https://newsroom.spotify.com/2024-06-03/adjusting-spotify-premium-prices-in-the-us/</ref>. | ||
==== Spotify | ==== Legal action by MLC against Spotify for underpaying songwriters==== | ||
* On | *On May 2024, the Mechanical Licensing Collective (The MLC) filed a lawsuit against Spotify for deciding in March to reclassify its Premium Individual, Duo, and Family subscription plans as Bundled Subscription Offerings because they now have audiobooks<ref>https://www.musicbusinessworldwide.com/spotify-sued-by-the-mlc-for-cutting-pay-rate-to-songwriters-via-premium-bundles/</ref>. | ||
*A 2022 legal settlement established that bundled services in the United States are permitted to pay a lower royalty to publishers and songwriters compared to standalone subscription services. | |||
*According to MLC, the action by Spotify on March will reduce the Service Provider Revenue reported to the MLC for Premium by around 50%. “The financial consequences of Spotify’s failure to meet its statutory obligations are enormous for Songwriters and Music Publishers," National Music Publishers Association (NMPA) boss David Israelite said on April 30. | |||
*“The lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement,” a Spotify spokesperson commented. | |||
*On August, Spotify filed a motion asking the court to dismiss the suit. Spotify estimates that if the MLC was to win the case, it will have to pay them 46 million euros. 35 million euros relates to Q2 while the rest is penalty<ref>[https://www.musicbusinessworldwide.com/spotify-asks-court-to-dismiss-mlc-lawsuit-over-cutting-pay-rate-to-songwriters-via-premium-bundles/#:~:text=Not%20only%20did%20Spotify%20not,also%20includes%20access%20to%20music. https://www.musicbusinessworldwide.com/spotify-asks-court-to-dismiss-mlc-lawsuit-over-cutting-pay-rate-to-songwriters-via-premium-bundles/#:~:text=Not%20only%20did%20Spotify%20not,also%20includes%20access%20to%20music.]</ref>. | |||
==== | ====TikTok to shut down its music streaming business==== | ||
* | *TikTok recently said it will shut down TikTok Music streaming business at the end of November 2024<ref>https://techcrunch.com/2024/09/24/bytedance-is-shutting-down-tiktok-music-globally/#:~:text=We%20will%20be%20closing%20TikTok,Music%20Business%20Development%2C%20TikTok%20said</ref>. | ||
*Deutsche Bank expects Spotify to absorb TikTok's 2-2.5 million subscribers<ref name=":0">https://seekingalpha.com/news/4153129-tiktok-shuttering-its-music-service-a-clear-positive-for-spotify-deutsche-bank#hasComeFromMpArticle=false</ref>. | |||
*In Q4, they expect 1.3M paid subscriber net add due to the shutdown. | |||
==== | ===Product developments=== | ||
=== | ====Spotify launched a new integration that enables music sharing to TikTok and Instagram ==== | ||
*On November, Spotify [https://newsroom.spotify.com/2024-11-07/spotify-rolls-out-new-tiktok-and-instagram-integrations-that-make-sharing-and-saving-easier-than-ever/ announced] that it was launching a new feature that enables users to share their favorite music, podcasts, and audiobooks in their TikTok and Instagram accounts. | |||
====Spotify expanded music videos in betas ==== | |||
*Earlier this year, Spotify [https://newsroom.spotify.com/2024-10-15/music-videos-in-beta-brings-an-improved-viewing-experience-to-new-markets/ launched] music betas 12 markets other than the U.S such as the U.K, Germany, Italy, the Netherlands, Poland, Sweden. | |||
*In October 2024, it announced that it was bringing music videos in betas in 85 more markets. | |||
* Earlier this year, Spotify [https://newsroom.spotify.com/2024-10-15/music-videos-in-beta-brings-an-improved-viewing-experience-to-new-markets/ launched] music betas 12 markets other than the U.S such as the U.K, Germany, Italy, the Netherlands, Poland, Sweden. | |||
* In October 2024, it announced that it was bringing music videos in betas in 85 more markets. | |||
* Music videos in betas enable premium users to turn their beloved songs into visual experiences. | * Music videos in betas enable premium users to turn their beloved songs into visual experiences. | ||
==== Spotify expanded AI playlist beta in other regions ==== | ====Spotify expanded AI playlist beta in other regions ==== | ||
* On September 2024, Spotify [https://newsroom.spotify.com/2024-09-24/ai-playlist-expanding-usa-canada-ireland-new-zealand/ expanded] its AI playlist beta to premium users in the U.S, Canada, Ireland and New Zealand. | *On September 2024, Spotify [https://newsroom.spotify.com/2024-09-24/ai-playlist-expanding-usa-canada-ireland-new-zealand/ expanded] its AI playlist beta to premium users in the U.S, Canada, Ireland and New Zealand. | ||
* The feature was first launched in the U.K. and Australia on April 2024. | *The feature was first launched in the U.K. and Australia on April 2024. | ||
* AI playlist combines Spotify's personalization technology with generative AI so that users can create personalized playlists using text prompts such as “upbeat pop music for my European summer vacation”. | *AI playlist combines Spotify's personalization technology with generative AI so that users can create personalized playlists using text prompts such as “upbeat pop music for my European summer vacation”. | ||
* Spotify said between April and September, users have created millions of playlists. | *Spotify said between April and September, users have created millions of playlists. | ||
==== Spotify expanded Spotify Daylist into 65 more markets ==== | ====Spotify expanded Spotify Daylist into 65 more markets ==== | ||
* On September, Spotify [https://newsroom.spotify.com/2024-09-04/daylist-new-languages-expanding-worldwide/ announced] that it was launching Spotify Daylist into 65 additional markets. | *On September, Spotify [https://newsroom.spotify.com/2024-09-04/daylist-new-languages-expanding-worldwide/ announced] that it was launching Spotify Daylist into 65 additional markets. | ||
* Spotify said that since launching Daylist a year ago, it has erupted as a fan-favorite feature. It pointed out that 70% of Spotify Daylist users tune in week after week and that millions of users stream it every day. | *Spotify said that since launching Daylist a year ago, it has erupted as a fan-favorite feature. It pointed out that 70% of Spotify Daylist users tune in week after week and that millions of users stream it every day. | ||
* Spotify Daylist is available to both premium and free users. | *Spotify Daylist is available to both premium and free users. | ||
* Daylist is a curated music playlist that is based on user's tastes and music they listen to. | *Daylist is a curated music playlist that is based on user's tastes and music they listen to. | ||
== Insights == | ==Insights== | ||
<references /> | |||