Spotify Stock: Not Even Apple or Amazon Can Challenge It

spotify stock
iStock.com/Tero Vesalainen

Spotify Is to Music as Netflix Is to Movies

The battle for the lucrative music streaming market is currently dominated by Spotify Technology SA (NYSE:SPOT), which has about 36% of the global music streaming market as of June 2017.

The numbers at Spotify compare favorably to the 17% for “Apple Music” and 10% for “Amazon Music,” but it is going to be a battle for Spotify to maintain its place on its perch. (Source: “Share of music streaming subscribers worldwide in June 2017, by company,” Statista, last accessed May 3, 2018.)

For now, Spotify is tops in music streaming until Apple Inc. (NASDAQ:AAPL) or Amazon.com, Inc. (NASDAQ:AMZN) can figure out how to catch up.

It won’t be an easy task, since Spotify is entrenched in the world’s music scene, with a major presence in much of Europe, the Americas, Australia, New Zealand, and certain regions in Asia. This bodes well for SPOT stock.

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Worldwide Music Streaming Market Shares, June 2017

Company

Market Percentage

Spotify Technology SA

36%

Apple Inc.

17%

Amazon.com, Inc.

10%

What makes the business model of Spotify a winning proposition versus that of Apple is that Spotify offers free memberships with limitations and hopes to convert these non-paying users into paying customers.

So far, it appears to be working for Spotify stock.

The company reported 170 million monthly active users as of May 2018, which is up 30% year-over-year. Of this user base, 75 million people are paying customers, a figure which has jumped an impressive 45% year-over-year.

In the first quarter, Spotify was slightly short on the revenue side, despite growth of 26% and 37% based on a constant currency.

While the revenue and earnings numbers were subpar, the fact that Spotify was able to convert so many users into paying customers is encouraging.

Chart courtesy of StockCharts.com

For 2018, Spotify stock is estimated to report revenues of $5.2 billion and ramp this up another 27.6% to $6.6 billion in 2019. (Source: “Spotify Technology S.A. (SPOT),” Yahoo! Finance, last accessed May 4, 2018.)

Of course, Spotify will need to continue defending its market share.

To try to attract more users with the hopes of conversion, Spotify has improved its ad-supported user experience by offering more flexibility in what people can listen to.

There is also a new data saver mode that uses less data when streaming via a mobile device.

Analyst Take

Spotify is clearly the leading player in the streaming music field.

If the company continues to innovate, SPOT stock’s value should move higher in the long term.