Spotify Investor Says Streaming Will Quadruple by 2025 — Any Questions?

Are the iPhone 7 Also Exploding? Maybe Yes, Probably Not

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Spotify has paid $5 billion to rights owners so far.  Is that number about to become much, much bigger?

Last year, Spotify says it had paid out $5 billion for music rights to publishers, labels, and collecting societies.  That was back in September, and the story has only been surging since.

But how big will this puppy grow?  And will any of this benefit artists?

Spotify is now set to go public on the New York Stock Exchange via an unconventional ‘direct listing’.  The move is highly anticipated and could have a monstrous impact on the entertainment, music and business worlds.

Now, investors are priming the pump — and making big claims to juice the public offering.

Like David Fiszel, the founder of New York-based Honeycomb Asset Management.  He owns a private stake in Spotify, which will soon be planted onto the exchange.  Fiszel believes that streaming music will continue to grow at rates that far exceed investor expectations, with its market size quadrupling from $10 billion to $40 billion over the next eight years.

Fiszel noted that people are paying about twice as much per year for streaming music now as they used to for CDs.

And the source for that stat is Goldman Sachs, a much bigger Spotify investor.  “Per Goldman Sachs research, the average consumer used to pay $50-60 per year to purchase five CDs,” Fiszel told Business Insider.

“In the digital world, many US consumers are paying $120 per year for a $10/month subscription”.

Some of those stats are debatable.  For starters, Spotify’s average per-month payment is probably lower than $10.  In fact, it’s probably substantially lower given a rash of freebies, $1 trial memberships, and discounted college plans.  Of course, Spotify isn’t sharing those numbers, though they may be forced to disclose ahead of their listing.

Also Read:  RBC Raises Spotify Target Price to $320 Following Positive Survey Results

And we’re not really sure where Goldman grabbed it’s ‘$50-60 for 5 CDs’ information.

Charging bullishly ahead, Fiszel’s next question is whether Spotify outright supplants radio, which is currently struggling.

Indeed, dashboard-embedded Spotify apps are a serious threat to traditional radio stations.  Even satellite radio could start to feel a serious pinch.

“Connected cars of the future will see streaming music as a replacement for terrestrial and satellite radio,” the investor predicted.

As of January 2018, Spotify had 70 million paid subscribers.  That’s 40 million than just two years ago.  Meanwhile, global monthly users have reached 140 million last year, according to the company (though that figure might be higher).  So there’s certainly a surge going on — though the question is how big Spotify grows, and whether the economics end up working.

 


 

2 Responses

  1. Avatar
    Remi Swierczek

    He is correct.

    …and by 2030 $300B of annual music goodwill will be LOCKED in $30B subscription and advertising GRAVE!

    Reminder: 1999 CDs sold to less than 1/6 of world population are worth today $60B in inflation adjusted dollars.

  2. Avatar
    Will Buckley

    So, Spotify’s revenue quadruples, which means ‘successful’ mid-level streaming artists earn $60. instead of $15?

    Now, I understand that investors don’t give a sh…. about musicians getting stiffed and having a world filled with ‘popular’ music, BUT Spotify continues to lose more money as it acquires more listeners, so there’s something broken there as well.

    I guess we’ll just have to see how the greater fool scenario plays out on this one.