Investors shouldn’t camouflage streamers with the same brush, US investment bank says

Thursday, June 09, 2022 5:39 p.m

(Photo by Ilya S. Savenok/Getty Images for Spotify)

Investment bank Raymond James said music streaming is in a better position than video streaming and urges investors not to sell streaming stocks too quickly.

It comes after Netflix continued to endure a difficult few months, with shares down 66% year-to-date on dwindling subscribers and a bearish growth outlook.

However, Andrew Marok, an analyst at Raymond James, took away that the challenges faced by one industry do not automatically translate to the other: “So what we are seeing in the competitive environment for music streaming is a much more stable environment than You see, for example, in streaming video, content owners are increasingly taking ownership of their content, shielding it, and going straight to consumers.”

In fact, the role of music labels is crucial in supporting music streaming stability, meaning the market can be much more efficiently dominated by Spotify and Apple Music as major players.

In contrast, the state of video streaming is much more volatile. For Marok, in the video streaming space, it’s “really a content differentiation story where you could see Stranger Things on Netflix one month and Obi-Wan on Disney+ the next month.”

“And you can switch back and forth between these services in a way that we really don’t see with music streaming,” he said.

This was backed up by analyst Ian Whittaker, who told City AM that the fact music giants don’t have to create their own content like Prime Video or Disney+, but simply have deals with labels means. This means that there is less pressure to constantly invest heavily.

Whittaker also said that the lack of exclusivity for most music titles means that the consumer doesn’t need multiple subscriptions or has the incentive to switch between services to watch a must-see program.

Alice Enders of Enders Analysis told City AM: “Video sharing platforms are ad-supported and streaming services are mainly subscription based and they are very different business models – Spotify licenses music and video sharing platforms don’t license the content and that gives them a breadth streaming services lack.”

Spotify’s momentum was underscored this week by Dawn Ostroff, Spotify’s Chief Content and Advertising Business Officer.

She revealed that the company made “close to” €200 million in podcast revenue last year, and squashed suggestions that the business was in bad shape.

Additionally, Spotify CEO Daniel Ek said at an investor presentation yesterday: “Some may also think that we’re a bad company, or at least a bad-margin company for the foreseeable future. And others might even think that the audio market just isn’t that important.”

“I can say with confidence that overall this model performs much better than you think,” he said.

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