Millennial Investing - The Investor’s Podcast Network

MI362: The Story Of Spotify And Valuation w/ Shawn O'Malley

Jul 29, 2024

56:16

Snipd AI

Shawn O'Malley, an expert in music economics, unpacks the fascinating evolution of Spotify and its crucial role in the music industry. He explains how streaming transformed piracy's grip on music consumption. Discover why Spotify's model keeps users engaged and how they maintain a competitive edge. O'Malley also reveals Spotify's plans for profitability, challenges in royalty distribution with music labels, and the potential growth within podcasts and audiobooks. His insights into financial models will inspire aspiring investors.

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Episode notes

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Quick takeaways

Spotify revolutionized the music industry by shifting from music ownership to a subscription-based streaming model, significantly reducing music piracy.

The platform's algorithm-driven features enhance user engagement and discovery, making music more accessible and affordable for consumers worldwide.

Despite challenges like high royalty costs, Spotify aims for substantial revenue growth through diversified offerings and strategic expansions into emerging markets.

Deep dives

Transforming the Music Industry

Spotify played a pivotal role in the transformation of the declining music industry, reinventing the way consumers access music. Before its inception, music piracy ran rampant, leading to a significant decline in recorded music revenue. In contrast to platforms like iTunes that focused on music ownership, Spotify's model revolved around streaming, allowing users to access a vast catalog for a subscription fee. This shift not only curtailed piracy but also encouraged music fans to pay for content, revitalizing the music industry after years of decline.

Intro

2min

Transforming Tunes: The Streaming Revolution

6min

Spotify's Market Strategy and User Engagement

7min

Spotify's Growth Strategy and Profitability Challenges

13min

Spotify's Growth and Advertising Potential

7min

Decoding Spotify's Financial Landscape

18min

In today’s episode, Shawn O’Malley (@Shawn_OMalley_) tells the story of Spotify, the music and podcast streaming app that hundreds of millions of people worldwide use.

You’ll learn about how streaming saved the recorded music industry, Spotify’s origins, the economics of music streaming, Spotify’s business model, risks, and future outlook, as well as Shawn’s valuation of the stock and how you can create your own, plus so much more!

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

01:45 - How the music industry was consumed by piracy and how streaming changed that.

02:56 - How Spotify disrupted the iTunes Store and Apple.

05:09 - Why Spotify’s service is so sticky.

05:23 - What are the keys to Spotify’s business model and future growth.

17:15 - What challenges Spotify faces from its competition.

20:42 - How Spotify transitioned from just music to being a broader audio streaming service.

24:21 - How Spotify can improve its profit margins.

27:50 - How music royalties work and how Spotify’s relationships with music labels works.

40:42 - What it looks like to build a financial model for big tech companies.

32:44 - Which metrics Spotify must focus on to justify its current valuation.

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
Check out The Spotify Play: How CEO and Founder Daniel Ek Beat Apple, Google, and Amazon in the Race for Audio Dominance by Sven Carlsson and Jonas Leijonhufvud.
Follow Sleepwell Capital for insights on the music industry.
Music Streaming Royalties 101 article.
Check out the books mentioned in the podcast here.
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