Good news! Investment management firm Guardian Fund thinks that by 2030, Spotify will be worth “at least five times more” than its current market cap. Which, with the latter being just under $60bn, means a prediction that the streaming service will be at least a $300bn company by the end of the decade. But wait, not-so-good news! Guardian Fund, which has recently invested in Spotify, is cooler on its music catalogue’s role in that growth.

“The key for Spotify is to change a variable cost base into a fixed cost base just like Netflix has. As the market share of the big labels, measured by the daily hours of engagement of the big labels, is declining, Spotify will be able to adjust its business model and create enormous operational leverage meaning that profitability will grow faster than expenses,” claimed its letter to investors. “The music catalogue is not the business model. The value lies in the machine learning that drives discovery and engagement, the original content from people like Michelle Obama, Kim Kardashian, and Joe Rogan, the data analytics and distribution for artists, the direct and social relations artists can have with fans through music and videos.”

This is just one investment firm’s view, but it’s a useful reflection of how Wall Street more widely is thinking about Spotify, we suspect.

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Stuart Dredge

Music Ally's Head of Insight

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