Spotify Needs to Sing Every Tune -- Heard on the Street
February 23 2021 - 6:29AM
Dow Jones News
By Dan Gallagher
Spotify sees itself as much more than a music-streaming
platform. Investors have long since gotten there.
The company laid out an ambitious vision Monday during a
two-hour webcast, touting new and coming offerings for listeners,
musicians, podcasters and advertisers. These include a new
high-fidelity music-streaming service for subscribers, more tools
for musicians and podcasters to expand their revenue streams and
significant international expansion that will take the service into
85 new markets this year. For podcasting--which has been of
particular interest to investors--Spotify has added a new
eight-episode series with former President Barack Obama and Bruce
Springsteen.
A news dump, in other words. And one that pleased investors
initially, sending Spotify's stock price up 5% before a broad-based
tech selloff pushed the shares back down into the red by the end of
trading Monday. Spotify is still up more than 11% since the start
of the year and about 138% over the past 12 months, well
outperforming other hot streaming names such as Netflix and Disney.
Shares of Warner Music Group, which as one of the world's largest
record labels controls some of the most sought-after music
Spotify's subscribers listen to, have actually lost about 4% so far
this year.
Opportunities beyond music streaming are a key draw for
Spotify's investors right now. The stock's big surge over the past
year has mostly come from hype over new podcast deals, with the
likes of Joe Rogan, Kim Kardashian and DC Comics. Even the royal
family is getting in on the action; Prince Harry and Meghan Markle
made a brief appearance in Monday's event to tout their own
exclusive Spotify podcast, coming later this year.
But while the number of podcasts on Spotify tripled last year to
2.2 million, the company has yet to break out any financial details
of the venture. The highly popular "Joe Rogan Experience" became
exclusive to Spotify on Dec. 1, but the company would only say on
its fourth-quarter call on Feb. 4 that the program "contributed
positively to user growth on the platform." In a note following the
results, Brian Russo of Credit Suisse said the company's outlook
for the current year "does little to suggest this content is
driving an inflection in the business."
Other new efforts, such as providing musicians and labels with
more services to find and grow listeners, are in an even
earlier--and less quantifiable--stage. But Spotify is now trading
at nearly 6 times forward sales, a record multiple that has also
more than doubled over the past year. The company has definitely
acquired a fan base among investors who like to run counter to Wall
Street's professional advice: 39% of brokers now recommend the
shares compared with 62% a year ago, according to FactSet. But
considering the time that may be needed for its newest efforts to
bear fruit, Spotify better hope those fans aren't the fair-weather
type.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
February 23, 2021 06:14 ET (11:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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