Are Music Streaming Stocks Worth The Attention Now?
There has been a lot of fuss over video streaming services centered around Netflix (NFLX Stock Report) amid the pandemic. However, music streaming stocks have been shuffled into the back seat somewhat. This is expected as fewer people commuted to work, reducing the usage of music streaming services in cars and through wearable devices. But the streaming of music through TV and game consoles grew materially. So, the total impact isn’t substantial.
Despite the temporary slowdown, music streaming remains an industry that’s getting bigger. The streaming revolution has unleashed a wave of disruption across the global music industry. That’s because 80% of the music industry’s revenue now comes from music streaming. Therefore, wouldn’t it be great for investors to put money into stocks that have been under the radar recently? They may not receive much coverage at times like this, yet have huge potential to grow in the future.
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According to a report by Goldman Sachs, the streaming market is expected to triple in size to $45 billion over the next two decades. The music streaming industry could be emerging as a bright light in the stock market. Are any of these music streaming stocks in your watch list?
Music Streaming Stocks To Watch #1 Spotify
Companies like Spotify (SPOT Stock Report) have built their entire business around music streaming. Monthly subscribers are a growing source of recurring revenue. Spotify remains the market leader, with 36% of global music streaming subscribers on its platform.
Shift To Podcasting The New Catalyst For SPOT Stock
Spotify is not like its competitors where the streaming revenue is just a small part of the latter’s overall business. Spotify has to innovate to stay at the top because that’s pretty much their only income, besides advertising. As such, to differentiate itself, Spotify has diversified into podcasting. It now offers over 1 million podcasts from its app. The company has made several investments to bulk up its podcasting offerings.
For instance, Spotify has just signed an exclusive multilayer licensing deal with popular podcast personality Joe Rogan. This is a huge deal to Spotify as The Joe Rogan Experience is one of the most downloaded podcasts in the world, with an engaged and loyal fan base. This partnership might draw users from other platforms to Spotify, and hopefully, convert them to become paying subscribers.
Right after the announcement, SPOT stock jumped more than 8% on Tuesday. This is not the first time Spotify closed a podcasting deal. Last year, the company paid over $200 million to acquire podcast producer Gimlet Media. Such strategic thinking on Spotify’s part could help keep it ahead of its competitors. But would such efforts be enough to propel SPOT stock further?
Music Streaming Stocks To Watch #2 Apple
Right, I know Apple (AAPL Stock Report) is not a music streaming stock. However, the music streaming operations of Apple is one of Spotify’s biggest competitors. Of course, music is only a relatively low portion of total revenue, given the much larger contribution from Apple’s hardwares. From our previous article, we’ve covered that all of the hardware sales were down while services have grown at a double-digit rate. And that could be massive if Apple increases the scale of this segment.
The stock is certainly one to watch, as consumers with Apple products may prefer to stick with the same company for music. Apple music subscriber count as of June 2019 stands at 60 million. While the number is definitely higher now, we don’t have the actual data to do a comparison just yet. Revenue from Apple’s entertainment streaming services is highly encouraging, soaring 17% year-over-year to $13.3 billion. But the question is, would the fast growing music business be able to offset the slowdown in other segments?
Music Streaming Stocks To Watch #3 Amazon
I know. Amazon (AMZN Stock Report) also isn’t exactly a music streaming company. The company made headlines in January when a report put 2019 growth for its Amazon Music Unlimited streaming music services at an impressive rate. Amazon Music usually doesn’t get the same buzz as Spotify or Apple Music, and that’s understandable. For those who seldom purchase stuff online through Amazon like myself, chances of encountering Amazon Music services are low.
The number of subscribers from Amazon Music currently stands at 55 million, which competes with Apple Music’s number of subscribers. The international growth of Amazon music also appears to be strong. Amazon Music has grown nearly 50% year-over-year across the US, UK, Germany, and Japan. Its subscribers have more than doubled in newer markets such as France, Italy, Spain, and Mexico.
Like Apple, Amazon is also looking at music streaming subscribers to pad its recurring revenue. Music streaming could also help boost sales of the Echo smart speakers. That in turn, could further integrate users into the Amazon ecosystem. However, music is still a small part of Amazon’s business. Will music ever be the primary driver of AMZN stock?