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Spotify Shares Jump 16% to All-Time High

Spotify
Jakub Porzycki/NurPhoto via Getty Images

Spotify logo is seen displayed on a phone screen in this illustration photo taken in Poland on Oct. 3, 2020.

Spotify’s share price soared 16.1% on Wednesday (Dec. 2) to an all-time high of $330.82, valuing the music subscription service at $62.7 billion. Seemingly immune from the pandemic’s economic woes, Wednesday’s high price marked an incredible run in 2020: $330.82 is a 121.2% gain year to date and 203% higher than 2020’s low of $109.18 on March 16.

Two news items about Spotify were announced Wednesday that could have excited investors. The first was about Wrapped, Spotify’s annual review of the year’s top songs and a personalized look back at each user’s listening in 2020. This year’s Wrapped allows artists with a Spotify account to view 2020 stats for their music -- total hours streamed, total listeners, the number of times a song was added to a playlist and more information. Widespread media coverage across business and tech publications made news of Wrapped an unmissable event. Evercore analysts posit that Wrapped went viral, leading to an increase in Spotify’s U.S. app ranking that attracted interested investors.

On a related note, information about podcasts could have reinforced some investors’ belief that non-music content can improve both growth and margins. Spotify’s run-down of most popular music and podcasts revealed The Joe Rogan Experience, exclusive to Spotify as of Tuesday, is its top podcast. Its popularity suggests the controversial podcast is going to be worth the $100 million Spotify is spending to license the show from Rogan. Owned and licensed podcasts give Spotify a chance to differentiate itself from its competitors. In the last two years, Spotify has purchased podcast producers The Ringer, Gimlet and Parcast and has landed exclusives with Michele Obama and Kim Kardashian West, among many others. It has also launched proprietary, music-focused franchises such as Sound Stories: Women in Hip-Hop and Butt Dial.

The second news item was about an anti-plagiarism tool that Spotify has filed for a patent in Europe. The unnamed technology ingests a songwriter’s lead sheet -- think sheet music with notation -- to compare the song to Spotify’s database and spot instances of infringement. The technology’s value is obvious: it can help songwriters avoid copyright infringement litigation and help Spotify weed out problematic musical works from its database. But does the subject of plagiarism and how to avoid it excite investors? Probably not.

Wednesday’s growth spurt underscores how investors think about tech companies versus the media companies that provide them content. Spotify’s high price on Wednesday nearly doubles the value of Universal Music Group’s €30 billion ($33 billion) valuation when Tencent acquired 10% of the company in March. Spotify’s value was still jaw-dropping after its midday slide. Shares of Spotify closed at $310.41, a 12.6% increase for the day, giving the company an enterprise value of $51 billion.

In comparison, Warner Music Group, the third largest music company, was valued at $17.8 billion at $29.92 in the early afternoon Wednesday with stocks rising 2.1% to close at $29.92. Warner’s share price is 13.9% below its all-time high of $34.76 and 16.8% above its low of $25.61 on Nov. 4.