According to a Wall Street Journal (WSJ) report, Spotify plans to roll out its paid podcast subscription option. The announcement, expected this week, intensifies the race for dominance on the podcasting scene.
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The WSJ reports that Spotify (SPOT) hopes to make podcasts more commercially viable by growing advertising income and encouraging subscriptions. The head of Creative Artists Agency’s podcast department, Josh Lindgren, said, “With Apple making its move into subscription, there is this platform war emerging.”
According to the WSJ report, Apple plans to take a 30% cut of revenue from subscriptions in the first year, and a 15% take thereafter. Unlike Apple, Spotify reportedly will not take a cut from podcasters, with podcast creators keeping all the revenue they earn from subscription fees.
Spotify has focused its spending towards exclusive podcasts, talents, and improving its technology. The WSJ reports that it currently has 2.2 million podcasts available on the service, with numbers almost quadrupling since 2019. (See Spotify stock analysis on TipRanks)
Last week, Andrew Uerkwitz of Jefferies initiated coverage on SPOT with a Buy rating. His price target of $360 implies upside potential of 29% from current levels. Uerkwitz is of the opinion that since Spotify is more of a platform than a streaming service, its customers are stickier.
He remarked, “Spotify is more platform than streaming service. The subtle differences are platforms have stickier customers, less likely to be disintermediated by new technologies, and longer tail of growth/margin expansion.” According to the analyst, platform customers are less likely to be reduced by sudden technology changes and thus Spotify stands to gain.
Consensus among Wall Street analysts is a Moderate Buy based on 11 Buys, 8 Holds, and 2 Sells. The average analyst price target of $345.00 implies upside potential of 21.43%.
Spotify scores a “Perfect 10” on TipRanks’ Smart Score rating system. This suggests that the stock is likely to outperform the overall market.
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