MI362: The Story Of Spotify And Valuation w/ Shawn O'Malley

The Intrinsic Value Podcast - The Investor’s Podcast Network

The Investor's Podcast Network

Education, Investing, Business

4.6 • 592 Ratings

🗓️ 29 July 2024

⏱️ 52 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

In today’s episode, Shawn O’Malley (@Shawn_OMalley_) tells the story of Spotify, the music and podcast streaming app that hundreds of millions of people worldwide use. You’ll learn about how streaming saved the recorded music industry, Spotify’s origins, the economics of music streaming, Spotify’s business model, risks, and future outlook, as well as Shawn’s valuation of the stock and how you can create your own, plus so much more! IN THIS EPISODE, YOU’LL LEARN 00:00 - Intro 01:45 - How the music industry was consumed by piracy and how streaming changed that. 02:56 - How Spotify disrupted the iTunes Store and Apple. 05:09 - Why Spotify’s service is so sticky. 05:23 - What are the keys to Spotify’s business model and future growth. 17:15 - What challenges Spotify faces from its competition. 20:42 - How Spotify transitioned from just music to being a broader audio streaming service. 24:21 - How Spotify can improve its profit margins. 27:50 - How music royalties work and how Spotify’s relationships with music labels works. 40:42 - What it looks like to build a financial model for big tech companies. 32:44 - Which metrics Spotify must focus on to justify its current valuation. *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members. Check out The Spotify Play: How CEO and Founder Daniel Ek Beat Apple, Google, and Amazon in the Race for Audio Dominance by Sven Carlsson and Jonas Leijonhufvud. Follow Sleepwell Capital for insights on the music industry. Music Streaming Royalties 101 article. Check out the books mentioned in the podcast here. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | Instagram | Facebook | TikTok. Check out our Millennial Investing Starter Packs. Browse through all our episodes (complete with transcripts) here. Try Kyle's favorite tool for picking stock winners and managing our portfolios: TIP Finance. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: Fiscal.AI Connect with Shawn: Twitter | LinkedIn | Email Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

Transcript

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0:00.0	You're listening to TIP.
0:02.0	Hey, everybody.
0:03.0	Welcome to The Investors Podcast.
0:05.0	I'm your host today, Sean O'Malley.
0:07.0	On today's episode, I'll be reviewing Spotify, which may be the app that you're listening to this podcast on.
0:12.0	From its founding to its business today and future outlook, my hope is to give you the groundwork for understanding the company while taking a swing at valuing its stock.
0:21.6	Spotify is a fascinating company because it changed the way the world consumes music and arguably
0:26.9	saved the music industry from its decline in the 2000s.
0:30.8	I use Spotify every day and most of my friends and family do the same, but how well does that
0:35.7	translate into value for shareholders of the
0:38.0	company? At the end of the episode, I'll walk you through my process for valuing Spotify and
0:42.3	the assumptions I made in doing so. With that, let's get right to it. Celebrating 10 years,
0:51.2	you are listening to Millennial Investing by the Investors Podcast Network.
0:56.0	Since 2014, we have been Value Investors' go-to source for studying legendary investors,
1:01.8	understanding timeless books, and breaking down great businesses.
1:05.8	Now, for your host, Sean O'Malley.
1:17.3	Thank you. For your host, Sean O'Malley. The story of Spotify is really a story about the transformation of a declining music industry.
1:23.5	We take for granted now that you can stream almost any song ever created at a moment's notice
1:27.9	from the palm of your hand while sitting pretty much anywhere in the world.
1:31.1	That was of course not always the case.
1:33.0	The way we consume music has evolved hugely in most people's lifetimes from vinyl to CD to the iPod.
1:39.1	For decades, the music business was stable with a well-established business model too.
	...

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