Many musicians find it difficult to manage life on the algorithm. But Wall Street, at least, liked what it saw on Wednesday, as audio streaming service Spotify Technology introduced more TikTok-esque sweeteners to its platform.
In its second “Stream On” presentation on Wednesday, Spotify SPOT,
executives introduced a range of new custom AI-powered features for users and artists: custom streams, loaded with audio preview clips; personalized recommendations and more sophisticated search functions; a custom AI DJ, which debuted last month; and short videos that artists can post on their profiles. Spotify is also giving more independent artists access to Discovery Mode, which can promote certain songs more aggressively, but with a lower royalty payment.
“Our goal is not to steal time,” Gustav Soderstrom, Spotify’s chief product and technology officer, said during the presentation. “It’s to help users save time.”
Analysts at Raymond James, in a research note on Thursday, said the overhaul would not immediately boost the finances of the company, which is still losing money. But they said the new features could boost its overall influence.
“While they are unlikely to be immediately accretive to finances, we believe that (the) announcements will make the platform an even more attractive place for creators, and could potentially provide more ammunition for the company in the future. negotiations with labels in terms of added value,” they said. said.
JPMorgan analysts, meanwhile, said Spotify “has now passed the peak of podcast investment in content and creative platforms/tools.” They said the platform’s podcast business could start turning a profit this year or next.
“We also believe that an increase in individual plan prices in the United States is likely in the coming months, which we believe could generate (over $211 million) in additional annualized revenue,” they said. declared.
To get there, Spotify will have to navigate a weaker digital advertising market, following corporate layoffs. Chief Financial Officer Paul Vogel, speaking at a Morgan Stanley conference on Wednesday, said advertising demand trends were still “shaky” in the first quarter.
Last year, Spotify chief executive Daniel Ek floated the idea of a US subscription price hike. But any increase would come as rising prices – for things like hotels, gas, transportation and plane tickets – and equipment shortages would make touring more difficult for all but the most talented artists. popular.
And as analysts speculate on a price hike, artists have complained about the low pay – as in a fraction of a penny per stream – provided by Spotify and other streaming services. During the “Stream On” presentation, Spotify said all-time payments to the music industry approached $40 billion.
Spotify pays most of its revenue to labels and other industry players – money that trickles down to artists after others have taken their cut. But as Spotify grapples with demands from artists and Wall Street, analysts at JPMorgan have warned that these royalty payments will “strain longer-term margins” for Spotify.
And depending on who you ask, AI could serve as either an enhancement or a replacement for the work of artists. And with the popularity of bots like ChatGPT, executives are getting more excited to use the technology.
At the Morgan Stanley conference, Vogel also said feedback on his AI-backed DJ has been “great” so far. But he said it was too early to suggest measures. Still, he spoke of the growing presence and concerns of the role of AI in music creation.
“The other area of the music AI debate, of course, is what generative AI can mean for music creation,” he said. “And obviously labels, especially Universal, are very focused on what’s going on algorithmically on Spotify and other places: how do you see the opportunity with AI-generated music in terms of creating content, boosting consumer engagement and satisfaction with what they hear on Spotify, but also obviously addressing the artist’s concern about generative AI? »
He added that Spotify’s goal is “to create a product where creators can create and users get the best experience for them.” But he noted that machines — from player pianos to electronics — have taken on a bigger role in music creation over the decades.
“I think it’s just going to evolve and we’ll have to evolve with that,” he said.
Shares of Spotify were down 1.3% on Thursday. Over the past 12 months, these stocks have fallen 8.2%. In comparison, the S&P 500 SPX index,
is down 7.5% over this period.
