Spotify (SPOT:NYE) is making a significant foray into the audiobook market, signaling its ambition to claim a broad sector of this burgeoning industry. Effective October 3, Spotify’s premium subscribers will enjoy an enticing offer of 15 hours of free audiobook content each month. Furthermore, users have the option to purchase an additional 10 hours of listening for just $10.99. Initially launched in the United Kingdom and Australia, this offering is set to hit the United States this winter. This article will highlight the effect of this milestone on Spotify stock forecast.
Partnership Expansion:
Reports suggest that Spotify has inked partnerships with the five largest publishing houses and independent authors, providing access to a curated selection of bestsellers.
This strategic move will see approximately 150,000 titles become available to subscribers. Spotify’s payment to publishers will be contingent on factors such as user listening time and the proportion of a book completed, in accordance with individual contractual agreements.
Spotify’s Audiobook Aspirations:
This strategic maneuver aims to assert Spotify’s presence in the lucrative audiobook market, currently dominated by Amazon’s Audible (AMZN). While Spotify already boasts an extensive music library and limited audiobook content, it’s clear that the company is now determined to carve out a more substantial share of the audiobook landscape.
Strategic Acquisition in 2021:
In 2021, Spotify acquired Findaway World, a digital audiobook distribution platform, for €117 million. The company further bolstered its audiobook offerings in 2022 by introducing approximately 300,000 titles from independent publishers, available on a pay-per-download basis.
Profitability Challenges:
Post-COVID-19, Spotify has faced profitability challenges due to intense competition and price-sensitive consumers. Additionally, heavy investments in the podcast segment have eroded margins. With a substantial user base of approximately 220 million paying subscribers worldwide, Spotify seeks to attract new listeners through this audiobook initiative.
Moreover, the company anticipates a potential migration of free users to premium subscriptions, ultimately boosting its revenue streams. In July, Spotify raised its premium subscription prices in the U.S. by $1, bringing them to $10.99 per month in a bid to enhance its sales.
Analyst Downgrades Spotify:
Wall Street maintains a cautiously optimistic stance on Spotify’s stock performance. Recently, Monness analyst Brian White downgraded SPOT to a Neutral rating. In anticipation of Spotify’s Q3FY23 results, scheduled for release on October 24, the esteemed analyst revised his outlook on the stock.
White cited SPOT’s impressive 73.61% gain in stock price year-to-date as a potential precursor to a forthcoming downturn. Fierce competition and thinning profit margins could spell challenging times for Spotify’s stock, and perhaps the streaming market as a whole.
Spotify Stock Forecast:
According to Spotify stock forecast from 21 analysts, the average target price is USD 166.86 for the next 12 months. The average rating is “Strong Buy“. Stock Target Advisor’s analysts are Slightly Bearish. This assessment is based on considering 4 positive signals and 6 negative signals.
SPOT’s Current Performance:
At the last closing, the stock price was USD 154.51. This price has changed by +1.41% over the past week, -1.94% over the past month.
Conclusion:
Spotify’s audiobook venture signals a strategic shift with potential impacts on its future. Despite profitability concerns, its diverse offerings and large user base solidify its position in the digital media landscape.
