Spotify's Market Cap Soars, Making It Worth Twice as Much as It Was 3 Months Ago

By Luigi Wewege Saturday, July 4, 2020

Popular streaming service Spotify is seeing its value grow rapidly in the financial markets this year. While one contributing factor is its continued marker leader spot in the streaming boom, another factor is its new offerings to attract new consumers and impress investors.

For the most part, that strategy is working in its favor.

After Spotify’s podcasting efforts lead to a series of share price bumps on Wall Street, the audio streaming company closed on June 23 on the New York Stock Exchange (NYSE) with an all-time high of $44.96 billion in market cap valuation after reaching a $241.76 share price.

Spotify's Current Market Cap

This latest news makes Spotify’s current market cap worth approximately $13.5 billion more than that of Vivendi, owner of Universal Music Group, that trades on the Paris Euronext Exchange (€27.87 billion / $31.53 billion). Its market cap is also worth almost three times as much as that of Warner Music Group ($16.21 billion), while also being over four times as much as that of Live Nation ($10.09 billion).

In fact, Spotify’s market cap value is worth more than double what it was three months ago — on March 23, the company was at $118.18 per share. Spotify’s market cap now is also worth more than double the price the company attained on the NYSE throughout October last year.

At one point, Spotify’s share price went as high as $257.23, earning the company a market worth $47.8 billion.

On June 20, analysts Brian White of Monness Crespi and Mark Zgutowicz of Rosenblatt Securities raised their price target to $275 per share. Spotify’s market cap valuation will rise above $51 billion if that price target is reached.

Contributing Factors

There are a handful of reasons for Spotify’s recent financial success. We take a look at three major game-changers.

Exclusive Celebrity Podcast Deals

After landing an exclusive deal with The Joe Rogan Experience on May 19, Spotify’s price share has risen by 42.7%, and its market cap climbed by around $13.5 billion. The multi-year deal is purportedly valued at $100 million, with stand-up comedian and TV host-turned-provocateur Joe Rogan having signed this exclusive deal to allow The Joe Rogan Experience to disappear from all other streaming platforms.

Apart from this endeavor, Spotify has continued to collaborate with more artists and popular personalities. Besides Joe Rogan, Spotify has also partnered with Kim Kardashian for a podcast that focuses on national topics of interest, including the Innocence Project. This endeavor could bring in similar numbers.

Podcast Sponsors

On June 23, the company’s share price went up by 2.4% with the news that they are allegedly testing an in-app interactive advertising format for podcasts. This new format would allow users to learn more about show sponsors: instead of consumers having to remember a promo code mentioned during the podcast, the new in-app feature will display offers that consumers can simply click on to find out more about the sponsors.

Exclusive Scripted Superhero Podcasts

Spotify's share price went up by another whopping 28.4% between June 12 and June 19. This climb was assisted by their June 19 announcement that they had signed up to become an exclusive distributor of scripted episodic superhero podcasts from DC Entertainment/Warner Bros. Spotify's market cap grew by 12.7% that same day.

Spotify: The Netflix of Audio?

The advent of these DC podcasts could earn Spotify the status of becoming the “Netflix of Audio.” After that, they could also position themselves as a direct competitor of Amazon’s Audible. However, this title might not be appreciated by record labels.

Spotify obtains podcasts at a fixed cost, sometimes even zero, because they are not considered royalty-bearing media, and royalties are not paid out to right holders each time they are played.

Directing their consumers’ attention towards non-royalty media, and away from royalty-bearing media might increase its margins because around 65% to 70% of Spotify’s revenue is lost to music content costs. This could lead to potential conflict with the music industry’s leading players.

Sources do say, however, that the company’s global licensing deal with Warner Music Group was hindered, with discussions implying that podcast consumption on the platform can affect music royalty payments.

About the Author

Headshot of author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

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