Competition from tech heavyweights
Though Spotify (SPOT) is a leader in the global music streaming market with a presence in over 75 countries, the company competes with tech heavyweights such as Apple, Amazon (AMZN), and Google (GOOG) (GOOGL).
These companies have large cash reserves and can easily acquire smaller players such as Spotify. These tech giants can pump billions of dollars into sales, marketing, and advertising.
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Free and pirated content remain popular
Though the music streaming market is expected to grow to over $13 billion by 2023, freely available radio content and pirated music downloads (especially in emerging countries) remain popular. A recent Pitchfork report stated that 38% of people listen to pirated music.
Spotify has claimed that over 300,000 creators and respective teams use its Artist platform on a monthly basis. However, content costs account for the majority of the company’s costs. Royalty rates for artists could also increase, putting a strain on the company’s margins.
A legal battle with Apple
In March 2019, Spotify filed an antitrust complaint against Apple in the European Union. Apple charges ~30% to content providers for the use of its in-app purchases platform. Can Spotify win a legal case against one of the largest companies in the world? Stay tuned for updates.
Spotify stock could provide multibagger returns if it can manage to hold its own against larger players, increase its market share, and improve its bottom line.