Thursday, December 20, 2018

Since appearing on the NYSE in April, 2018, Spotify® receded again from its recent $24bn market cap. The company finished trading (11/12/18) with a $131.31 share price, down 4.89% from previous sessions. The share price high-point hit $196.28 in May, 2018, creating an estimated market cap of $35bn. The company ended September 2018 with approximately 87m total global subscriber base. That's a rise of 4m subscribers from the 83m they reported in June.

At the end of Q3 2018, Spotify® garnered an average growth rate of 1.3m subscribers per month representing a slowdown in market share growth while the company simultaneously mounted an aggressive free offer of 60 premium access days in several high-profile markets. Spotify's per stream rate over the last 3 years has ranged between $0.0035 – $0.0039, positioning the titan in the lower-paying category of competitive platform payouts to content owners.

Recently, Spotify® announced it was going to encourage indie artists to upload music directly to the company's debut service designed specifically for independent producers, called Spotify® For Artists. The service also provides distribution aggregation to all the other competitive streaming services via their 2018 acquisition of competitor, DistroKid.

Spotify® CEO Brian Ek openly confirmed their intent by saying, “Our strategy with our marketplace side of the business is the same as the rest of Spotify®… it’s a freemium business, meaning there will be a certain amount of products which artists and labels can get for free, and there are others which we will charge money for.”

Since the company’s market cap values are on a downward trend albeit displaying strong growth, most investors seem to be betting on the premise that Spotify® can become a Netflix®-style disruptor for the entire music industry, instead of just another digital distribution partner for the global community of major labels.

The major labels and content owners have already expressed concerns about this policy move including lobbing possible threats to block the company's access to developing streaming markets. Spotify®'s CFO has also recently been quoted in several media outlets stating that labels can expect 2019's negotiations to potentially include a request for a larger baseline gross margin for the streaming giant.

How these services can benefit the independent creator/producer are yet to be seen, although the opportunity to aggregate content over multiple distribution outlets worldwide has distinct benefits for artists seeking maximum distribution and sale opportunities. The competition landscape is formidable and jammed with offerings designed specifically for indie content creators by the likes of Pandora®, Facebook For Artists®, Apple®, Google®, YouTube®, Tidal® and SoundCloud®, just to name a few.

Spotify® has shown their ability to attract new subscribers, even while dealing with volatile financial conditions, however, it may take some time to see if their business model has the capacity to attract the millions of independent artists that are currently deciding the best (and most lucrative) path to choose as their preferred streaming platform.

Written by Staff

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