Spotify (SPOT) - Any thoughts?

Spotify is the leader in the music streaming space and currently has around 170m users (75m paid subscribers). The subscription business generates close to 90% of total revenue and advertisements on the freemium users make up the rest of the revenue.

Spotify is disrupting a huge global industry and thanks to its efforts, the music industry’s revenues have started rising again.

Clearly, this is a global opportunity but competition is picking up (Apple Music, Amazon Music and Youtube) and since Spotify doesn’t own content, it shells out over 70% of its revenues to the labels and artists as royalties.

The business is also spending heavily on sales & marketing which is hurting its bottom line.

Competition and royalties aside, people love the company and it is clear to me that streaming will be around forever and in a decade from now, it may become the only way people listen to music.

As a customer, the value proposition is immense - access to global music, playlists and undiscovered content at a nominal monthly cost; what is not to like?

The company is beefing up its video offerings and recently, it has hired a top notch talent to bolster this segment.

Financially, it will make so much sense for Spotify to sign up artists directly and eliminate the record labels but it has to be careful not to piss off its content suppliers (although it has started doing this with the smaller artists).

For weeks, I have tried to figure out how Spotify will be able to differentiate itself from competition (i.e. whether through original music content, original video content, exclusive deals and releases with artists etc.)? I still haven’t been able to come up with a reasonable answer.

The opportunity is clearly there; Spotify’s valuation is still pretty fair but the presence of competition, lack of original content and royalty payments to labels/artists have so far stopped me from investing in this business.

I’ll be grateful if anybody will be able to explain how Spotify will be able to differentiate itself from its competitors? If it success in doing so; this will turn out to be a monster long-term growth story and a wonderful long-term investment.




I think you hit the nail on the head which is also the reason I won’t really look much further into Spotify. I don’t see any differentiable qualities. And they are up against stiff competition.


Piling on with the issue that I have no idea why they filed publically…except as an exit for founders.

This is a race to the bottom and I’ll sit on the sideline and eat crow if I’m wrong. But very low convinction on the business and any sort of differentiation

Another competitor not clearly mentioned is Google music. Same price and with the addition of YouTube Red which is no commercials while watching youtube and some other stuff I’m probably not aware of.


Do any of the other music services have a feature like Pandora where it puts together a play list of similar music based on an original request and up and down votes?

Early on in Pandora’s public life, i got enticed… thinking it of a NFLX of music… sure enough, content / royalty cost was very high, it became a “story stock” and the roller coaster was wild… i couldnt jump out when in positive, ended up booking a loss at some point.

SPOT has done much better than P on many front, yet, I am not sure if there is any major difference in business model. I am staying out for now…