Ca$htag$: Consumers Tuning Out SPOT in Favor of AAPL

SPEAKER_1 (0:00)

It's time now for our Cash Track segment. For that, let's bring in our next guest, and that's Andy Swan, co-founder of LikeFolio, with fresh sentiment data on Spotify today. Andy, shares of Spotify have had a tough road this year.

You got new sentiment data on Spotify. Are the people still tuning in, is the question.

Andy Swan (0:21)

That is the question, and Spotify is a stock that we have been bullish on for a very long time.

For years, Spotify has had an enormous edge over all competition. Its AI DJ felt magic at the time, I think, because it was. Had custom playlists, really built you into the system, locked you into the system, personalized data. Just a phenomenal company, a phenomenal product. But what we're seeing now is that that lead is cracking because they're finally getting very competent competition from the biggest player in town, the company that owns the device in everybody's pocket. Of course, that is Apple. So this is the first time we've really recorded what I would call serious improvement from Apple itself. They've rolled out AI playlists. In the spring, you can see the growth in consumer interest for AI or for Apple music since that. I think the biggest part of the story is that it wasn't just a blip.

Apple pushed out these new features, saw a huge surge in interest from consumers, and that demand growth has sustained at a very high level. So we're looking at Spotify now. It was really the only player in town that mattered for a very long time. Now, they're getting serious competition from a functionality, usability standpoint, from the device manufacturer itself. And that's a new scenario for Spotify. We'll have to see how the company responds. But I think right now it's appropriate to be cautious on Spotify's growth prospects. I think the customers that they have are pretty loyal. But there's always a new player on the doorstep. And in this case, it just happens to be the biggest, baddest player in town, which could spell trouble for Spotify.

SPEAKER_3 (2:29)

Andy, you know, this is an amazing story of Spotify, and how they were able to start much after Apple, basically take over music. I am a loyal, happy Spotify user.

But your data on consumer demand is alarming. If you're a Spotify fan, because that jump in Apple is something that catches your attention, and it's probably something that Spotify can't ignore. Andy, what do you think it was? Are they just doing some of the things that Spotify is doing? Are they doing any of them better? I can't imagine they're doing things better than Spotify, because this system is so fun to use. What is Apple doing that made such a big jump in their demand?

Andy Swan (3:22)

I don't think that they're doing anything extraordinarily special that's beyond what Spotify does, but the big advantage Apple has is that it's already on the phone. Apple Music is already there. It's not something that you have to go download and pay for to a separate company.

When we look at Apple Music signups and cancel searches, so people saying, I want to sign up for Spotify, I want to sign up for Apple Music versus I'm going to cancel Spotify, I'm going to cancel Apple Music. When we put those two charts together, it really does paint a little bit of a dire picture for Spotify because we're seeing a huge surge in interest for people wanting to sign up for Apple Music, and we're seeing a pretty large increase in number of people talking about canceling Spotify. So that combination is concerning.

And I don't, to your point, I'm a Spotify loyalist, have loved it for years. It's the first button that I push when I get into my car.

And I absolutely love it. But the fact is Spotify is not integrated into the device already. And I think that's Apple's big advantage in a lot of different areas that they exploit really well. A lot of times they're late to the game, like in this case specifically, but eventually they get there and they have the distribution to win. So, we're concerned about Spotify. I still think it's one of the best companies in the world. It's just now they have to step up their game even more and push the envelope even more in order to compete with the bad boy in town Apple.

SPEAKER_1 (5:09)

So, Kevin asked one of the things that came to mind because I was wondering who was kind of switching over, like what was the reason for Apple versus Spotify? Because when I think about listing, honestly, the first thing I think about is Spotify over Apple. UBS today is lowering its price target on Spotify. They're still bullish on it. So, just down to 675, they were close to 706.90. They still got a buy rating. One of the reasons they're worried about is cost because of platform investments. And I'm sure this is something you've been paying attention to. You said you guys have been long-time bullish on Spotify.