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We often use a service and think, “I should buy stock in that,” without knowing if stock is available. Listening to music and podcasts with Spotify might be an almost religious experience for you, connecting you to all the sounds you love. But, can you invest in Spotify?
Without a doubt, Spotify, like its predecessors Pandora, iTunes, and Napster, has revolutionized the music industry with its freemium model. The company went public on the New York Stock Exchange in early 2018.
Do you think you’re ready to buy SPOT shares? If so, here’s a little company history, the pros and cons of buying, and how you can purchase Spotify stocks.
A Peek at Spotify's Offerings
Spotify operates under a “freemium” framework, meaning that about 35 million songs are free to its users. Basic users will experience advertisements between songs and do not get to directly choose songs when using the mobile application. They offer discounts to students, customized playlists, and even partner with other media giants, such as Showtime, on projects.
For a small fee, users can upgrade to the Spotify premium service, including the Spotify family plan. This means they’ll experience ad-free listening, the ability to choose individual songs on mobile, download playlists for offline use, and have access to Spotify Connect. They’ve also branched off to Spotify Family, which lets six people share a subscription, similar to what Netflix, Hulu, and other media giants have done. Ultimately, this model led Spotify to acquire a total of over 180 million users, with 83 million of them being paid users in 65 markets around the world.
They consider themselves to be “the biggest driver of revenue to the music business today,” according to their company website.
History of Spotify and Spotify Stock
Here’s a brief history of SPOT stock, where it’s been, and how it got there.
- April 23, 2005: Daniel Ek, and Martin Lorentzon create Spotify in Sweden. The pair say that the idea formed after peer-to-peer music sharing service Napster was shut down.
- June 2011: Receives its first $100 million in funding
- March 2016: Received its first $1 billion in funding
- May 2016: Announces Sponsored Playlists, which gave brands the ability to match listeners to their content, products, and other items through targeted playlists.
- June 2016: Spotify hits 100 million users
- April 2017: Launches Spotify Student, which gives a 50 percent discount to university students with an .edu email address.
- April 3, 2018: Spotify is listed on the New York Stock Exchange (NYSE:SPOT) and opened at $165.90.
- November 2018: EPS remains in the negative, finishing the year at -$0.44.
- October 2019: EPS turns postive at $0.39.
- October 2020: EPS dip into the negative at -$0.68.
- October 2021: EPS rises to -$0.48.
- January and February 2022: The platform comes under enormous pressure to remove Joe Rogan’s podcast from the platform after he is accused of spreading COVID misinformation. Neil Young, Joni Mitchell and others remove their catalogs from the platform. Eventually, hundreds of episodes of Rogan’s podcast featuring COVID misinformation are removed.
For more information, you can review Spotify’s investor relations information.
Spotify does not yet have a dividend history. However, the stock should continue to trend upward, making it more likely that dividends will be paid in the future.
Is Spotify a Good Investment?
Pros of buying Spotify stock:
- Freemium model seems to work, and does for giants like Skype, Pandora, and others.
- Its popularity is undeniable. In 2017, it was the most downloaded music app on the iOS platform in the US.
- The platform remains in the news, offering both paid and free options to consumers—effectively straddling the line with both premium and freemium options.
Related content: How to Buy Pandora (PNDORA) Stock
Cons of buying Spotify stock:
- Pushback from labels and rockstars over royalty payments, but Spotify says that they paid over 8 billion dollars to rightholders as of December 31, 2017.
- Disputes with other industry players, like Apple, that started with an email prompting people to get rid of Apple music and subscribe to Spotify.
- Negative backlash following COVID misinformation on the Joe Rogan podcast and the company’s $100 million investment in the comedian could cause the stock to stagnate.
A Strategy for Adding Spotify to Your Portfolio
Because Spotify occupies a unique space in the entertainment industry, it straddles the line between the consumer and the artist. As concerns swirl around the brand—particularly as they relate to artist pay and social consciousness—Spotify could be under fire. However, the stock market continues on, and it is always trending upward. This is, presumably, the direction Spotify will go as it adapts to the streaming space and remains in the forefront of the social conversation.
How to Purchase Spotify Stocks
- Pick a brokerage.
First things first, you’ll need a brokerage to facilitate the purchase. If you don’t have one yet, don’t sweat it. You’ll need to do a little research. Look out for commissions, fees account minimums, and types of securities offered. We already did the research for you through Benzinga’s Best Online Brokerage awards. Here’s a quick look at our top picks.
- Choose how much money you can invest.
Of course, only invest what you can afford to lose. Think carefully about your other investments, too. You’ll have to decide based on stock price and your budget. If you don’t have enough cash to invest in real stock, you can buy fractional shares, growing your portfolio as much as you can at the time of the purchase.
- Make the purchase.
This process will differ a bit based on your brokerage. You’ll have to choose the amount of stock you’d like to buy, place your order, and make sure the purchase goes through. After that, you’ll be a proud owner of Spotify stock.
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Because Spotify if a newly-public company, it may be hard to forecast trends. But, we do know that it has seen major successes in the short time since its founding. With over 100 million users, a valuation of almost $10 billion, and a niche spot in the music industry, it may have a place in your investment portfolio.
Questions & Answers
You can get Spotify Premium by registering for a free account, adding your payment information and setting up recurring payments for the service. If you use the family plan, you may add family members as needed.
Every year, Spotify sends users the Wrapped feature that explains what they listened to most, categorizing their listening and even comparing the user’s listening to other users. The playlist for each year is downloadable and can be saved as a playlist in the user’s library.