Spotify stock slips as multiple threats loom

Spotify [NYSE: SPOT] stock is under pressure as the streamer faces multiple threats and questions about its choices and long-term viability.

Spotify stock fell 7.8% at the end of last week to close at $243.24 down from a Tuesday high of $263.85. Overall the stock is down 13% in the last 20 days.

Multiple factors are driving the downward trend.

Unprofitability has long been a concern, but a new study led by Mark Mulligan of MiDIA also shows that Spotify lost two percentage points of global market share compared to the first quarter in 2020 due to accelerating growth from competitors. Amazon, Google, and Tencent made the biggest gains.

Analysts at Bernstein are also questioning Spotify’s heavy investments in podcasting, a sector where growth is slowing overall.

With all the intense focus on how engagement will hold up for video streaming and video games as the pandemic rolls off, we have found few investors asking that same question about podcasting,” according to the report. “Which ought to matter a lot, given how much focus and capital Spotify is devoting to it.”

Higher royalty payments also threathen profits

Another looming threat to Spotify’s profitability is that the UK and perhaps other regulators could force the company to pay artists more.

A bombshell study released by the UK Parliament called for comprehensive streaming royalty reform “not only to redress the balance for songwriters, performers, and composers but to tackle fundamental problems within the recorded music industry.”

The report called for “equitable remuneration” for artists and a ‘complete reset’ of music streaming to fairly compensate performers and creators.

That could see music played on platforms like Spotify treated as rental under UK law with 50% of the generated recorded music royalties paid directly to performers via a PRO. Currently, just under 50% is split between all rights holders.

Artists, managers, BMG, and others are also calling for increased payments.

MORE

• UK leaders call for 50% of stream revenue to be paid to artists as part of a ‘complete reset’ of the music industry

• Spotify still #1, but Amazon, Google, Tencent made big gains [MIDiA Global Subscriber Report]

Bruce Houghton is Founder and Editor of Hypebot and MusicThinkTank and serves as a Senior Advisor to Bandsintown which acquired both publications in 2019. He is Founder and President of the Skyline Artists Agency and an online professor for the Berklee College Of Music.