Spotify loses roughly 75% of its value as the company's podcast strategy backfires
The company spent around $1 billion pushing the deals with the big stars
Spotify, the glorious Swedish streaming giant, made it to the big leagues almost immediately after it went public in April 2018.
At its market debut, the company's shares opened to trade at $165.90, marking an initial valuation of $29.5 billion as it went public via a direct listing method.
However, Spotify's short-lived reign as a major streaming platform has become increasingly questionable as its stock trades at $80 per share, with a rough 80 per cent drop from its record close value this year.
What is likely surprising is how the streaming giant has slumped to huge losses despite signing big deals with the royals, Joe Rogan, the Obamas, and Kim Kardashian.
The company spent around $1 billion pushing the deals with the big stars, with an additional $230 million on acquiring podcast studio Gimlet in 2019, $200 million to Joe Rogan, and another $200 million for the Ringer in 2020.
With the slump in global financial markets post the Russia-Ukraine war and the increasing fears of inflation, the company is now facing an issue with increasing expenditures even as the collected revenue remains nearly the same.
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Experts suggest the company needs to go beyond its plan of increasing monthly subscriptions through multi-year licenced contracts.
With its full collection coming from its $200 million paid premium users, the demand for audio content has slumped as competitors such as YouTube, Apple, Amazon, and TikTok retain their market share, especially of the Gen-Z population.
As Spotify enters a new phase, it needs to diverge from the previously well-sought strategy of podcasts back to advertising.
The company is now trying to adopt YouTube's strategy that uses ad services to monetise content. With the promise to retain more creators, Spotify vows to deliver funds based on the true cut, which currently goes into the pockets of the music businesses.
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