Netflix or Spotify: Investors shouldn’t tar streamers with the same brush says US investment bank
Investment bank Raymond James said music streaming is in a better position than video streaming, urging investors not to dump streaming shares too quickly.
It comes after Netflix continues to ride out a rocky few months, with shares down 66 per cent in the year to date thanks to dwindling subscribers and a downbeat outlook for growth.
However, the takeaway from Raymond James analyst Andrew Marok was that the challenges faced by one industry cannot be automatically applied to the other.
“So what we see in the competitive environment for streaming music is a lot more stable environment than you see, for instance, in streaming video, where content owners are increasingly taking ownership of their content, walling it off, going directly to consumers”, he told Yahoo.
Indeed, the role of music labels is crucial in supporting the stability of music streaming, allowing the market to dominated by Spotify and Apple Music as key players.
By contrast, the state of video streaming is much more volatile and fluid. “It really is a content differentiation story, where you could watch “Stranger Things” on Netflix one month and then “Obi-Wan” on Disney+ the next month”, Marok said. “And you can cycle between those services in a way that we really don’t see with streaming music”.
This was echoed by analyst Ian Whittaker, who told Morning Wire that the fact that music giants generally don’t need to create their own content like Prime Video or Disney + do means there is less pressure for constant heavy investment.
Whittaker also said that the lack of exclusivity for most music on specific platform means the consumer doesn’t need multiple subscriptions nor has the same incentive to flip between services to watch a must watched programme: Elton John’s hits can coexist on Spotify and Apple Music.
Alice Enders from Enders Analysis told Morning Wire: “Video sharing platforms are ad supported and streaming services are mainly subscription supported and those are highly distinct business models – Spotify licenses music and video sharing platforms do not license the content and that gives them a breadth the streaming services lack.”
The momentum of Spotify was underlined by its Spotify’s chief content and advertising business officer Dawn Ostroff this week.
She revealed that the company brought in “close to” €200m in podcast revenue last year, pushing aside suggestions that the business was in bad shape.
On top of this, speaking at an investor presentation yesterday, Spotify CEO Daniel Ek said: “Some may also think that we’re a bad business, or at least a business with bad margins for the foreseeable future. And others may even think that the audio market just isn’t that significant.”
“I can confidently say that this model in its totality is doing way better than you think,” he said.