It hasn’t been long since Spotify (SPOT, Financial) made its public debut. Hitting the market with a splash, Spotify stock climbed dramatically on its first day of trading and has held strong value since. Now, the company is getting even more spotlight as news breaks that the company plans on launching an entirely new version of its free service. While many are excited to learn about this updated Spotify, the truth is that the move could be an incredibly bad one.
Spotify plans to launch a big update
The news first broke on Bloomberg and has quickly spread across the web since. According to various reports, the free version of Spotify’s music streaming service is going to get some pretty interesting feature upgrades.
- One of the updates to the free version of Spotify that is expected to come down the line is an option for free users to pick the exact music they want to listen to. It is also expected that free users will have the ability to tap into more playlists. While Spotify currently offers these features, they are only offered to premium subscription members.
Music Choice - One of the updates to the free version of Spotify that is expected to come down the line is an option for free users to pick the exact music they want to listen to. It is also expected that free users will have the ability to tap into more playlists. While Spotify currently offers these features, they are only offered to premium subscription members.
- Spotify is also expected to be making it easier to use its services on mobile devices.
Ease Of Use - Spotify is also expected to be making it easier to use their services on mobile devices.
At the moment, no one quite knows when the new free version of Spotify will be available. However, there is speculation that the launch will be announced during Spotify’s media event on April 24, 2018.
Why spotify plans on launching the new service
As a publicly traded company, Spotify has quite a bit to think about. At the end of the day, with revenue at $4.5 billion in the year 2017, the company isn’t a small fish. Investors are going to be looking for continual and monumental growth. At the end of the day, the company needs a flood of users to hit its platform each quarter in order to keep investors happy, and it believes that changes like this can do just that.
This could be a horrible move
At first glance, the new version of the Spotify service seems like a great move. If it was only an ease of use update, it might actually be a strong move. However, this is much more than an ease of use update, and Spotify may be kicking itself relatively shortly after the update.
The reason is relatively simple. While the company is offering more features on the free service to drive more users, it is thinning the line between the features offered for free and the features that users have to pay for. The only big difference between the two services following the update will be the fact that paid users experience no ads. However, due to the way in which the company provides advertising, there is nothing intrusive about it, and it may not be enough of a push to get free users to want to upgrade and become paying users.
The deciding factor for Spotify stock
For Spotify, a deciding factor is going to be profitability. While the growth that we’re seeing in users and strong revenues seem to be exciting for investors at the moment, it’s important to remember that this is also a company that generated a loss of $1.5 billion on $4.5 billion in revenue in 2017. Some suggest that given its past, combined with growing competition in the industry, the company may never turn a profit. Nonetheless, if it ever did, the monumental valuation we’re seeing right now would look more like pennies in the grand scheme of things.
