Spotify Technology S.A. (SPOT, Financial) is a leading digital music service available in 178markets, offering on-demand audio streaming through paid premium subscriptions as well as an ad-supported model. Disappointing gross margin disclosure resulting from its investments in podcasts pressured shares. Subsequently, on its analyst day, Spotify provided better disclosure that highlighted the improving profitability of the company’s music business. We continue to view Spotify as a long-term winner in music streaming with potential to reach more than one billion monthly active users.
Spotify is a leading digital music service available in over 175 countries. The company offers on-demand audio streaming through paid premium subscriptions as well as through a free ad-supported model. Shares fell due to continued controversy surrounding Joe Rogan, a podcaster exclusive to Spotify’s platform, along with broader macroeconomic concerns. We view Spotify as a long-term winner in audio streaming with potential to reach more than 1 billion monthly active users because of its scalable core music product and growing library of podcasts. Its 5 million creative artists could increase to 50 million, and we believe its advertising revenue potential is several multiples of what it currently generates.
From Ron Baron (Trades, Portfolio)'s Baron Focused Growth Fund second-quarter 2022 letter.
