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Last week saw some notorious shifts in the music streaming industry. Both Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL) unveiled several new and cool features for their respective audio platforms.
Shocking to many, Spotify (NYSE:SPOT) then experienced a stock price decline of 10% at the same time.
As expected, this eventually ignited serious doubts out of all of Spotify’s shareholders. Was this change enough to hurt Spotify big time? Should they be remaining as the company’s shareholders at all?
Here’s a detailed analysis of what took place.
An unstoppable rise in competition
For starters, what did Facebook and Apple announce at all?
Regarding Facebook, they announced a new short sound bites feature that will allow users to share them with their friends and introduce a new podcast service and a live audio product for open discussions.
In Apple’s case, they instead announced a complete revamp of their podcast app along with an updated subscription system. This new system will allow for new ad-free content and a proper monetization system for content creators.
Although Spotify’s primary business model is music streaming, podcasting remains one of its most profitable secondary features. This means that both Facebook and Apple would be coming up as competitors for Spotify and strong ones at best due to their sheer size and market strength.
Of course, Facebook and Apple’s preexisting popularity and user base then went on to be the main factors behind all of Spotify’s shareholder’s uncertainties.
What’s next for Spotify?
While introducing newer competitors to the equation will more than likely stir things up in the industry, this change will still be beneficial to Spotify overall.
Regardless of where listeners consume their favourite podcasts in the end, up to 70% of the entire market is distributed and monetized by the podcast-centred companies Anchor and Megaphone. These are companies that Spotify has very recently acquired.
In essence, this boost in listeners among all platforms would still be profiting both Anchor and Megaphone, which in turn would end up benefiting Spotify via its competitors.
Nevertheless, Spotify’s podcast ventures are still strong enough on their own.
For a year, the company managed to up its total number of monthly active users from 16% up to 25%. In addition, eMarketer recently reported that Spotify has got more than enough prospects to surpass Apple in the podcast business in late 2021.
So, both financially and in popularity, it’s hard to picture Spotify’s growth stopping any time soon.
What should you do as an investor?
While Spotify has undoubtedly had its fair share of bumps and competition over its 15 years of business, it has stood as one of the most prominent entertainment-based companies in terms of growth and popularity.
Even if these new competitors prove themselves strong enough to rival Spotify, there’s no way of ignoring the latter’s dominance of the market with more than 345 million active users per month.
So, in the end, this decrease in stock price value should instead be seen as an excellent opportunity for buying quality shares at a reduced price. Not only will Spotify be able to recover in due time, but it also has perfect prospects to bring upon remarkable wealth for long-term investors.