![]() Now that it's the streaming app its users use for music, podcasts, and audiobooks, Spotify probably has a lot more pricing power than it displayed with its latest increase. Non-exportable lists of favorite songs, artists, and albums take time to build. That said, they are making the Spotify app stickier by the day. ![]() Podcasts and more recently, audiobooks, probably won't be the huge profit drivers that investors are hoping for. I'm going to go out on a limb and predict further gross-margin expansion now that the company is spending far less to acquire new, exclusive podcast content. Spotify's Q3 gross margin of 26.4% was an improvement year over year, but it's still lower than the company reported a few years ago. SPOT Gross Profit Margin (Quarterly) data by YCharts. Unfortunately, this dynamic isn't showing up in the company's results. Premium subscribers won't tolerate ads between songs, but Spotify gets to serve podcast advertisements to paying users without complaint. Spotify is also the first and only audio-streaming platform to offer audiobooks right next to music and podcasts. This makes Spotify an especially lucrative platform that creators of all sizes want to be on. That said, its early lead as an all-encompassing audio-streaming platform can still give the company an enduring advantage.įor a couple of years now, the Spotify Audience Network has been helping advertisers buy podcast ads at scale. Spotify's attempt to drive membership levels higher with exclusive podcasts hasn't worked out as hoped. With revenues and costs moving in opposite directions, though, the heavy operating losses it's been reporting turned positive during the three months ended in September. Spotify reported frighteningly large operating losses in recent quarters. SPOT Operating Income (Quarterly) data by YCharts. ![]()
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