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XSpotify Earnings: The Music Streaming War Is Heating Up
Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake
On Wednesday morning's earnings call, Spotify chief executive Daniel Ek stressed his firm's focus: "Our primary strategy," he said, "is growth, rather than maximizing revenue." Three times he underscored that the long-term trend of "linear to on-demand" will continue to help Spotify grow, and that the tailwind may even "be accelerated" by the coronavirus.
Indeed, COVID-19 appears to have had little impact on Spotify's first-quarter results. Total users grew to 286 million (a 5% quarterly increase), 130 million of whom now pay for the ad-free version (also up 5%). Advertising revenues are down, but that inflow represents less than 15% of Spotify's total take, which was flat on the quarter.
Spotify has recently been growing outward, too, through bolting on new services and making several acquisitions to extend its audio footprint beyond music. Investors like what they see: the stock surged 11% from yesterday's close.
But Spotify's competition is growing, too, with both Morgan Stanley and Barclays researchers highlighting the risk in their Spotify earnings analyses. Looking at the playing field, at first blush Spotify seems comfortably ahead.
*Estimate from Music Ally's 2020 Q1 Global Music report | **Based on Counterpoint Research's global market sizing of 358 million
More than the numbers
But a deeper look reveals some long-term competitive vulnerabilities for Spotify. dot.LA spoke with Will Page, Spotify's former chief economist and the author of
Pivot — a forthcoming book on navigating digital disruption — about the music streaming landscape. He likened each of the top U.S. players to "chess pieces" and gave his view of their respective strengths:
- Spotify: "A first mover in streaming, therefore a first mover in gathering data -- something you can't replicate. It can also scale across the Android population, which in the U.S. is twice the size of iOS."
- Apple Music: "Ties into a valuable ecosystem of TV, books and podcasts, each with its own unique app. It's also succeeded in doubling down on hip-hop – a genre with deep roots in L.A."
- Amazon: "Can move in many directions, from music to devices to games to films, finding value by killing friction. Acquiring IMDb, for instance, gives them perfect information about films it doesn't even carry."
- YouTube: "They have more reach than the rest combined. Everyone who pays for the other three services will also be using YouTube. Having your foot on another player's patch is a big advantage in a game of chess."
Spotify's prodigious diversification into podcasts — there are now over 1 million titles on the service, the company says — may give it a leg up. In 2019 the company acquired two L.A.-based production houses, Parcast and The Ringer, along with Brooklyn-based Gimlet Media.
Los Angeles is poised to continue playing a big role in the ongoing growth of podcasts. Neon Hum, an L.A.-based podcast production company, recently closed an undisclosed funding deal with Sony Music. In July 2019, Wondery, another production outfit based in West Hollywood, finalized its $10 million series B, supported by Beverly Hills group Watertower Ventures. Self-funded Crooked Media boasts a loyal audience in its L.A. backyard and beyond.
It's no wonder that Spotify's head of podcast communications Kevin Turner told dot.LA that "Los Angeles is one of the most important podcasting hubs in the world and is the center of gravity for Spotify's podcasting business." Turner mentioned that Spotify's L.A. office has over 300 employees, with plans to hire more in the coming months. It will also be building podcast studios and production facilities in the Arts District.
From L.A. to Stockholm, one key question for Spotify is whether podcasts will prove to be complements or substitutes for the Swedish firm's lower-margin music assets. On today's call, Ek said podcast fans are highly engaged and "listen to more music as well." A good sign, but with the medium's relatively low barriers to entry, competitors could catch up quickly.
We'll make it, I swear
Perhaps, however, the audio streaming market is big enough to share. "Competition needn't be a zero sum game," Page noted. "Just in the U.S., by some estimates there are currently around 110 million subscribers." Considering the 220 million or so residents with a smartphone and a credit card: "to quote Jon Bon Jovi, 'we're only halfway there'."
Ek himself has wondered aloud on several occasions, including today, why the video market should be valued 10-times higher than the audio one, despite having similar levels of consumer engagement. He points to the billion-odd people still listening to radio as a key growth opportunity.
"There's no one on a global scale that's focused on audio," he emphasized. "We are."
The key question looking forward, is will that advantage last?
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Sam Blake covers media and entertainment for dot.LA. Find him on Twitter @hisamblake and email him at samblake@dot.LA
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Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake
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Astroforge Raises $13M To Mine Asteroids
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Y Combinator startup Astroforge wants to use its new $13 million seed round to mine asteroids.
The Huntington Beach-based company aims to become the first company to bring asteroid resources back to Earth, TechCrunch reported Thursday. Initialized Capital led the funding round and was joined by investors Seven Seven Six, EarthRise, Aera VC, Liquid 2 and Soma.
“When you look at the opportunity here—and the opportunity really is to mine the universe—this is such a huge opportunity that investors are willing to make the bet on a longer time horizon,” Astroforge co-founder Matt Gialich told TechCrunch.
Virgin Orbit veteran Gialich launched the company alongside his co-founder, SpaceX and NASA alum Jose Acain, in January; the four-person firm, which Gialich said is now hiring for seven more positions, hopes to successfully mine an asteroid by the end of the decade. The seed money will fund Astroforge’s first two missions, with its first being a demo flight scheduled for a SpaceX Falcon 9 rideshare launch next year.
While Astroforge is keeping the specifics of its technology close to the vest, the company told TechCrunch that it involves a “high-rated vacuum” and requires a zero-gravity environment, but won’t involve actually landing on the asteroid itself. The company is eyeing asteroids ranging from 20 meters to 1.5 kilometers in diameter that carry high concentrations of platinum-group metals, which limits its potential targets to less than 1 million of the 10 million asteroids near Earth.
Astroforge wouldn’t be the first to attempt this science fiction-esque endeavor, though commercial space mining has faced financial and logistical obstacles that no company has yet overcome. NASA, for its part, is counting on the private sector to realize the U.S.’s space mining ambitions, then-deputy administrator Jim Morhard told dot.LA in 2020.
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Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Illumix Founder Kirin Sinha On Using Math to Inform Creative Thinking
Yasmin is the host of the "Behind Her Empire" podcast, focused on highlighting self-made women leaders and entrepreneurs and how they tackle their career, money, family and life.
Each episode covers their unique hero's journey and what it really takes to build an empire with key lessons learned along the way. The goal of the series is to empower you to see what's possible & inspire you to create financial freedom in your own life.
Kirin Sinha wanted to be a dancer. When injury dashed that dream, she turned to her other passion: math.
On this week’s episode of the Behind Her Empire podcast, host Yasmin Nouri talks with the founder and CEO of augmented reality (AR) technology and media platform Illumix.
Sinha received degrees from MIT, the University of Cambridge and LSE and founded a nonprofit to help middle school girls with their math skills. She ventured into AR while perusing an MBA at Stanford. Since founding Illumix in 2017, Sinha has raised $13 million from investors including Lightspeed and Maveron Ventures.
Her background in mathematics informs how she problem solves as a CEO, she said. Both math and her dance background taught her to seek out creative solutions.
“A lot of people think that math is very rote and analytical, but at its core it's truly not,” Sinha said. “It's about being creative. It's about having this building block for expressing and understanding the world around you.”
That creativity is bolstered by habits her mother taught her, such as surrounding herself with affirmations drawn onto post-it notes to bolster her spirits. Working in AR, Sinha said she's aware that what people surround themselves with impacts their inner world.
“Your diet is the people around you,” she said. “It's what you surround yourself with. It's the images and the words that surround your day-to-day life. I really spend a lot of time thinking about how can you improve the wider sense of the word diet around you.”
A crucial part of Sinha’s diet is carving out time for a daily walk to dedicate time to ponder Illumix’s future. Reflecting on big-picture goals and challenges allows her to consider how AR changes the ways people engage with the space around them.
Hear more of the Behind Her Empire podcast. Subscribe on Stitcher, Apple Podcasts, Spotify, iHeart Radioor wherever you get your podcasts.
dot.LA Editorial Intern Kristin Snyder contributed to this post.
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Yasmin is the host of the "Behind Her Empire" podcast, focused on highlighting self-made women leaders and entrepreneurs and how they tackle their career, money, family and life.
Each episode covers their unique hero's journey and what it really takes to build an empire with key lessons learned along the way. The goal of the series is to empower you to see what's possible & inspire you to create financial freedom in your own life.
Rael Raises $35M To Grow Its Organic Feminine Care Brand
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Rael, a Buena Park-based organic feminine care and beauty brand, has raised $35 million in a Series B funding round, the company announced Wednesday.
The funding was led by the venture arms of two Asian companies: Japanese gaming firm Colopl’s Colopl Next and South Korean conglomerate Shinsegae Group’s Signite Partners. Aarden Partners and ST Capital also participated, as did existing investors Mirae Asset and Unilever Ventures.
Rael described the new round—which takes its total funding to date to $59 million—as “the largest amount raised in the U.S. feminine care category to date.” The company said it plans to use the capital to grow its product offerings, retail partnerships and global marketing reach.
Having already branched into skincare products meant to combat hormonal acne, co-founder and CEO Yanghee Paik said Rael plans on further expanding beyond basic feminine care products. “We aspire to be a clean, holistic personal care brand for women, so we’re graduating from just being another organic feminine care company,” Paik told dot.LA.
Paik and her two co-founders, who are all Korean-American women, launched Rael in 2017 and started out by selling organic pads on Amazon. Paik said she was inspired by the products she would bring back home after trips to South Korea, where the organic category represents more than 30% of the feminine care market (compared to less than 10% of the U.S. market, according to Rael). The startup has since expanded into retail stores like Target and Walmart, and part of its new funding will be dedicated to further growing its retail presence.
These days, Rael is part of an increasing number of companies focused on organic feminine care, with brands like LOLA, The Honey Pot and The Flex Co. all offering organic menstrual products.
“The feminine care industry is not like beauty, which attracted a lot of investors initially,” Paik said. “People are noticing that it’s one of the markets that has not been noticed by investors as much, but has a lot of growth potential because it’s been dominated by big brands. Now there are female-founded smaller brands that are trying to make a difference there.”
As part of Rael’s growth efforts, the company has also brought in Lauren Consiglio, a former marketing executive at Unilever and L’Oreal, as its president.
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Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.