In the competitive world of streaming music, industry titans Amazon.com, Apple, and Google hold a significant advantage over Spotify Technology (SPOT). Besides their financial flexibility, these tech behemoths can tap into new customer streams effortlessly.
Deutsche Bank analysts, in a recent report, expressed caution regarding Spotify’s user growth prospects. Despite the overall optimism surrounding streaming music, the bank cited concerns about margin growth and intense competition. According to Deutsche Bank, the competitive edge that Amazon.com, Apple, and Alphabet-owned Google currently possess over Spotify revolves around:
Financial Flexibility
Unlike Spotify, these industry giants have the freedom to run their streaming music businesses at a loss. While Spotify faces pressure to prove its ability to achieve long-term margins, Apple, Amazon, and Google can continue to invest in hopes that music streaming will attract more users to their respective ecosystems. This allows them to potentially exert pricing power over Spotify.
In this high-stakes battle for streaming supremacy, Spotify must tread carefully as it navigates an increasingly challenging competitive landscape. As the industry evolves, only time will reveal how these power players will shape the future of streaming music.
The major players in the tech industry – Apple, Google, and Amazon – have distinct approaches when it comes to their core offerings. For Apple and Google, according to Deutsche Bank, their focus lies in hardware. This means that they prioritize the development of high-quality devices that integrate seamlessly with their respective software ecosystems. On the other hand, Amazon’s main strength lies in its Prime service, which offers a wide range of benefits to its customers.
It is worth noting that all three companies have ventured into the market of voice assistants. They have released smart speakers equipped with advanced voice recognition technology, aiming to capture the growing demand in this area. This move not only expands their product portfolio but also allows them to tap into the lucrative voice assistant business.
Despite certain concerns raised after Spotify’s first earnings report as a public company, investors have shown confidence in the streaming giant. In fact, Spotify’s stock has seen a 17% increase in value since the beginning of 2018, outperforming the S&P 500 index. This positive trajectory has even surpassed the early May highs following its initial public listing in April. Wall Street analysts have set an average target price of approximately $176 for Spotify, aligning closely with the current market value. Among these analysts, Deutsche Bank’s target price ranks fifth-lowest out of the 20 assessed, according to FactSet data.
Before Spotify went public, analysts analyzed the competitive landscape and its potential impact on the company. One viewpoint suggested that Amazon could be a valuable ally for Spotify due to their complementary strengths. Apple, on the other hand, was seen as a platform that appeals most strongly to “die-hard” music enthusiasts. Google posed the biggest threat to Spotify due to its dominant presence in the online video space through YouTube.
It is noteworthy that Alphabet, Amazon, and Apple are among ‘s Next 50 companies, emphasizing their prominent positions in the tech industry.
