Spotify’s new TikTook dance unlikely to instantly enhance financials, analyst says. But others see income — and worth hikes — forward

“Our goal is not to steal time,” Gustav Soderstrom, Spotify’s chief product and know-how officer, stated on the presentation. “It is to help users save time.”

Raymond James analysts, in a analysis observe on Thursday, stated the revamp wouldn’t instantly enhance financials for the corporate, which continues to be shedding cash. But they stated the brand new options may strengthen its affect total.

“While likely not immediately accretive to the financials, we think (the) announcements will make the platform an even more attractive venue for creators, and could potentially provide more ammunition for the company in negotiations with labels in terms of value-add,” they stated.

JPMorgan analysts, in the meantime, stated Spotify “is now past the peak drag from podcast investments in content & creation platforms/tools.” They stated the platform’s podcast enterprise may begin to flip a revenue this 12 months or subsequent 12 months.

“We also believe a price increase to the individual plan in the U.S. is likely in the coming months, which we estimate could drive (more than $211 million) in incremental annualized revenue,” they stated.

To get there, Spotify must navigate a weaker digital advert market, within the wake of firm layoffs. Chief Financial Officer Paul Vogel, at a Morgan Stanley convention on Wednesday, stated traits in advert demand have been nonetheless “choppy” within the first quarter.

Spotify Chief Executive Daniel Ek final 12 months floated the thought of a worth hike on U.S. subscriptions. But any enhance would come as rising costs — for issues like motels, fuel, transportation and airfare — and gear shortages make touring for all however the most well-liked artists tougher.

And as analysts speculate on a worth hike, artists have complained concerning the low pay — as in, a fraction of a cent per stream — supplied by Spotify and different streaming providers. During the “Stream On” presentation, Spotify stated all-time payouts to the music trade have been approaching $40 billion.

Spotify pays most of its income out to labels and others within the trade — cash that filters right down to the artists after others take their lower. But as Spotify contends with calls for from artists and Wall Street, JPMorgan analysts warned that these royalty payouts “will weigh on margins longer-term” for Spotify.

And relying on who you ask, AI may serve both as an enhancement or a substitute to artists’ work. And with the recognition of bots like ChatGPT, executives are getting much more enthusiastic about find out how to use the know-how.

During the Morgan Stanley convention, Vogel additionally stated that suggestions on its AI-backed DJ had been “great” to this point. But he stated it was too early to supply metrics. Still, he touched on the rising presence, and issues, of AI’s function in making music.

“The other area of AI debate on music, of course, is what generative AI may mean to music creation,” he stated. “And obviously there’s a lot of focus from the labels, especially Universal, on what’s happening algorithmically on Spotify and other places: How do you think about the opportunity with AI-generated music in terms of creating content and driving engagement and making consumers happy with what they’re hearing on Spotify, but also obviously addressing the artist’s concern around generative AI?”

He added that Spotify’s purpose was to “create a product where creators are able to create and users get the best experience for them.” But he famous that machines — from participant pianos to electronica — have taken on a higher function in making music over the a long time.

“I think it’ll just evolve and we’ll have to evolve along with it,” he stated.

Shares of Spotify have been down 1.3% on Thursday. Over the previous 12 months, these shares have fallen 8.2%. By comparability, the S&P 500 Index
SPX,
-1.85%
is down 7.5% over that interval.