If the feature takes off, Spotify could also conceivably bundle virtual tokens or gifts as perks for paid subscribers.
NETFLIX GEN TIKTOK SPOTIFY BLEND GENSHAWBLOOMBERG FREE
However, that business lost significant momentum in the first half of 2020 as cash-strapped users bought fewer virtual gifts throughout the pandemic.īased on those facts, Spotify might launch a short video platform with ads and virtual gift purchases, which could squeeze more revenue from its free users who won't commit to monthly subscription fees. The app is the core of TME's "social entertainment and other" segment, which grew its revenue by 36% to 18.3 billion yuan ($2.67 billion) last year.
Tencent Music's WeSing generates most of its revenue by letting viewers buy virtual gifts for their favorite karaoke performers. TikTok and its Chinese counterpart Douyin currently reach over 800 million MAUs worldwide. ByteDance is privately held, but Bloomberg claims the company more than doubled its revenue to $17 billion last year, with a net profit of $3 billion. TikTok generates most of its revenue from ads and virtual gifts, which viewers can buy for their favorite content creators. Can Spotify emulate TikTok and WeSing's success? In that context, it makes sense for Spotify to launch a third growth engine beyond subscriptions and ads to generate higher-margin revenue. It also expects to remain unprofitable throughout the entire year.
Spotify expects its user growth to remain stable in the second half of the year, but it only expects its revenue to rise 7%-18% year-over-year in the third quarter due to the pressures on its ad business and currency headwinds, and 11%-21% in the fourth quarter. The loss of that ad revenue then reduced its gross margins and offset the higher margins from its subscription revenue.
Spotify's revenue growth decelerated significantly in the second quarter, as the COVID-19 crisis throttled its ad revenue from free listeners. But would an expansion of Spotify's platform with short videos actually strengthen its business? Tencent Music generates most of its profits from its WeSing karaoke platform instead of its streaming music platform, and TME and Spotify already own significant stakes in each other - so it wouldn't be surprising to see the two companies drawing ideas from the same well. The filing also suggests Spotify could follow Tencent Music ( TME -2.79%), the largest streaming music company in China, into the "social music" market. and other markets amid escalating tensions with China. The filing, which was first spotted by Digital Music News, also indicates a viewer can look up a song's name and artist on the video's overlay, then listen to the rest of the song on Spotify's main platform.Ī patent doesn't guarantee Spotify will add the feature, but it seems like the streaming music giant is interested in gaining some users from ByteDance's TikTok, the popular Chinese app facing potential bans in the U.S. Spotify ( SPOT -1.04%) recently filed a patent that could allow its users to create short "video moments" synchronized with its music.
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