In the past two years, Spotify has lost half of its value and then doubled in price. Leaving Spotify shareholders exactly where they started, maybe with a sore neck from the whiplash.
But in that time Spotify has changed as a business. Two years ago, in mid-2021, Spotify was pushing into podcasting – Gimlet was acquired for $230 million, Joe Rogan’s deal is reported to be over $200 million, the Sussexes got a $20 million deal, and the Obama’s $25 million. In total, Spotify was estimated to have spent over $1 billion on exclusive podcast content. Fast forward two years and Spotify is moving away from podcasting, firing the architect of their exclusive content policy, Dawn Ostroff, and laying off hundreds of staff. At the same time, it is pushing harder into audiobooks and openly challenging Apple about its App Store practices in the audiobook space.
Spotify as a business is changing, albeit still underpinned by a dominant music streaming franchise. So for investors in Spotify, the question becomes: as the business change does the investment thesis remain?
This article is one such investor reckoning with their Spotify investment. It starts by looking at their original thesis for investing in Spotify and then considers how much has changed within the business over the past two years. It is an important reminder that we need to be periodically revisiting our investment thesis’s as our businesses and their competitors are constantly evolving.
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