Spotify Drops After YouTube Unveils New Music Streaming Service YouTube Music
Shares of Spotify (SPOT) are down after Google (GOOG, GOOGL) confirmed Wednesday night that it will launch a new music streaming service, YouTube Music, next week. Despite the launch of a rival offering, an analyst contended that Spotify is still "best in class."
YOUTUBE MUSIC: Google announced in a blog post on Wednesday night that it will launch YouTube Music, a new music streaming service that makes "the world of music easier to explore and more personalized than ever," on May 22. YouTube explained the new service, saying "YouTube Music is a new music streaming service made for music: official songs, albums, thousands of playlists and artist radio plus YouTube's tremendous catalog of remixes, live performances, covers and music videos that you can't find anywhere else - all simply organized and personalized. For the first time, all the ways music moves you can be found in one place." It added that "While fans can enjoy the new ad-supported version of YouTube Music for free, we're also launching YouTube Music Premium, a paid membership that gives you background listening, downloads and an ad-free experience for $9.99 a month." To extend the features of YouTube Music Premium beyond the music app, YouTube said it will soon launch YouTube Premium, the new name for the YouTube Red subscription service, which includes ad-free, background and offline across all of YouTube, as well as access to all YouTube Originals including Cobra Kai, Step Up: High Water and Youth & Consequences. New subscribers to YouTube Premium will be charged $11.99, while existing YouTube Red members will continue to pay the current price. YouTube Music will launch in the U.S., Australia, New Zealand, Mexico and South Korea on Tuesday and will be expanded to other countries in the following weeks. Publicly traded companies that already offer music streaming services include Spotify, Pandora (P), SiriusXM (SIRI) and Apple (AAPL).
WHAT'S NOTABLE: Spotify shares began trading on the New York Stock Exchange in early April. In a regulatory filing ahead of the IPO, Spotify said it commanded about 42% of the music streaming market, with 71M paying members and 159M listeners who use the service at least once a month. In its first earnings report as a public company, Spotify boasted 75M paid subscribers. Apple currently has over 40M paid subscribers for its music streaming service.
SPOTIFY STILL 'BEST IN CLASS': Buckingham analyst Matthew Harrington maintained a Neutral rating and $175 price target on Spotify, telling investors in a research note that despite the official announcement of YouTube Music's launch date and the "crowded" space, Spotify remains "best in class." Harrington said that while the music streaming space is congested, its "breakout growth" can support multiple players, adding that Spotify retains immediate advantages around its brand resonance and music-oriented AI data.
PRICE ACTION: In late morning trading, shares of Spotify are down 2% to $158.06. Also trading lower is Pandora, which is down 1.6%.
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