Spotify price collapses over 70% year-to-date, as post COVID-19 2020 stimulus has ended and inflation is beginning to erode Spotify's subscription base. Controversial figure Joe Rogan, Spotify's main podcaster, is reliant on low cost subscription rates to complete with tech giants. Will Spotify step up advertising in 2023?
Chart 1
Spotify's share price collapse has been nothing less than spectacular, considering it was a darling of the 2020 reflation trade after Central Banks and governments flooded the world with trillions of dollars, money was pouring into online streaming services and podcasts as global lockdowns carried on before vaccinations reached their 90% threshold for economies to open back up in 2021.
As noted with Chart 1 above, the reflation trade revved up after the March 2020 lows (blue vertical line), when the vaccine trials of mRNA COVID began, but share prices were very much invigorated by all the stimulus payouts which started to be rolled out from early 2020. And since the peak of 2021 with speculation showing signs of volatility on higher interest rates and stimulus pretty much being drained out of the markets, it has been inflation that has since taken hold. You can see this, with the sell off beginning in earnest at the end of 2022 of the NASDAQ and more so Spotify, which has fallen over 70% year-to-date (Chart 2).
Chart 3, shows ZOOM and Netflix all suffering the same fate as Spotify, with Netflix slightly more appealing than Zoom and Spotify. But inflation not only erodes revenue for speculative tech companies that stream online content, which includes their reliance on subscription only podcasters - it also erodes consumer spending power, so any extra monies going out, say when we were all cashed up post inflation amidst the COVID stimulus of 2020, is now being prioritized.
Despite controversial podcaster Joe Rogan's misinformation relating to COVID-19 and his racial slurs, Rogan remains Spotify's main earner, yet is unable to lift the share price, which could be more to do Spotify's reliance on premium users paying a competitive rate rather than ad revenue. Which you can see is an issue, if one was to compare Elon Musk's recent acquisition of Twitter as a private company and his attempt at creating a paid premium service, he is still reliant on advertising to fill the gap. Musk, who is also a controversial figure, with both him and Rogan seen as pillars of paleolibertarianism with large doses of left wing conspiracy theories attached, would definitely scare off most advertising giants.
Any controversy and/or misinformation spouted by Rogan would have an effect on the share price, as noted with Chart 4. When in late January 2022, Neil Young requested that his backlog of music was to be removed from Spotify if the management did not offer a counter balance to Rogan's free reign of antivax propaganda, the share price after these events began to lose traction thereafter, falling to its 70% lows.
So, Spotify may run into more problems financially in 2023, if it cannot raise its subscription base from its $9.99 a month for U.S. users and begin to complete with the tech giants such as Apple and Amazon, who have already risen prices in light of inflation. The other issue is advertising, to which it pays only a small percentage of revenue to Spotify and the company may need to widen advertising to keep their subscription rates competitive. Lastly, is Rogan's misinformation/controversy cause and effect. Will we see it again in 2023?
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