Also, the company has been striving to accomplish profitability that is deeply rooted in the music streaming business model. The company could possibly utilize its investments and focus towards podcasting as it has the potential to reduce costs, lift user loyalty, and raise pricing power with suppliers and users.
The podcasting expansion is being enabled by the recent acquisitions of Gimlet and Anchor. Spotify has been using its cash and investments for expanding into podcasting while having no debt. The company has been inching closer to owing to the content in the podcast segment. The company has lots of room to grow as a higher number are opting for radio instead of podcasting.
In the coming years, the company’s growth in the podcast segment could be driven by voice devices expansion, wider availability on streaming services, and integrated applications in cars. The market analysts believe that the streaming services with podcasts could replace the radio in the future. The profit margins are likely to improve backed up favorable deals with record labels, higher pricing power with consumers, and lower costs through podcasts.
For the second quarter, the company reported better-than-expected revenues while earnings fell short of estimates. Monthly active users (MAUs) grew 29% year-over-year to 232 million. The average revenue per user (ARPU) was EUR4.86, down less than 1% year-over-year.
Investors, who were willing to bear short-term volatility, will be beneficial in the long term driven by the buying opportunity created by the continued sentiment regarding Spotify’s prospects. It is uncertain when the company will achieve growth but Spotify is likely to share information with regard to the same in the upcoming quarterly call.