Spotify tries to turn up the volume on Wall Street
The Future. While primarily known as a music service, Spotify’s financial future lies squarely in podcasting… and CEO Daniel Ek made sure Wall Street knew that with a recent presentation. With podcasting — and the advertising revenue it generates — becoming the key financial lifeline for Spotify, it may inadvertently highlight how detrimental streaming has been for the music industry.
Despite everyone and their mom using Spotify, the company is struggling to actually make money, according to THR.
- Since its direct listing in 2018, Spotify has grown exponentially, but its gross margins (profitability expressed as a percentage) have remained the same… and by the same, we mean “not great.” That’s kept the company’s stock from growing.
- So, earlier this month, CEO Daniel Ek held his first investor day in years to highlight what has been behind the cash crunch — the heavy, nonstop investment into podcasting.
- It has invested $1 billion in the podcasting space, which it expects to become a $20 billion business for the company… eventually.
- Ek’s message to investors was that the losses would peak this year but decline as the podcasting market matures.
So here’s the $20 billion question: Did Wall Street buy it? Bank of America analyst Jessica Reif Ehrlich summed up the vibe on the Street best: “The inflection in podcasting should be a key driver of future margin improvement.
Translation: “Cool, we buy it.”