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Spotify’s podcasts gamble not paying off, says Citi

By | Published on Monday 18 January 2021


Podcasts! It’s all about podcasts! The future of streaming services is podcasts! Podcasts are where the smart money is going! Except that it might not be. Analysts at US bank Citi last week told clients that Spotify’s big bet on podcasts doesn’t appear to be turning the company into a big profit machine.

Spotify has, of course, spent millions of dollars on acquiring podcast companies and securing exclusivity deals with big name podcasters over the last couple of years. The acquisitions were part of a strategy to diversify the Spotify business, which dominates premium music streaming but is still not profitable and – in the music space – arguably suffers because it has the same catalogue of tracks as all its competitors.

But has that strategy paid off? No. Or at least not yet, reckons Citi. Its analysts argue that the big podcast push has not resulted in “a material positive inflection in app downloads or premium subscriptions”. As a result, it advised investors to sell their stock in the company. We’ve still got a Spotify share you can buy, if anyone’s interested. Just one, but it’s very well cared for.

“If we were to see a material positive inflection in app downloads or premium subs (from higher gross adds or materially lower churn), we would alter our view”, says Citi’s report. “But our fear is that if podcasting doesn’t provide a way for Spotify to shift away from music label dependence, [Wall] Street may reassess the underlying value of the business. And, that would be bad for Spotify’s multiple and equity value”.

Spotify stock fell just over 6% to $319.82 a share before close of trading on Friday. This down from an all time high of $353.11 earlier this month. The price is still more than double what it was a year ago though.

Elsewhere in podcasting news, tech website The Information reports that Apple is reportedly considering launching a podcast subscription service.

The move would see the current dominant podcast aggregator charge customers to listen to podcast programmes. It’s not exactly clear what this would mean – although Apple would possibly offer podcasters the opportunity to charge a fee to access exclusive content within the Apple Podcasts app.