Netflix, Inc's (NASDAQ:NFLX) share price crash has pulled down other media stocks emulating the streaming giant's moves. Spotify Technology S.A. (NYSE:SPOT) valuation is also losing its mojo even before Netflix's crash, the Financial Times wrote.
Spotify's market capitalization is about twice its 2021 revenue, while Netflix's market cap is about three times its 2021 revenue.
Also Read: Why Spotify Shares Are Crashing Today
Spotify and Netflix, pioneers of streaming in their respective industries, have millions of subscribers and built globally famed brands. Both were under pressure to drive subscriber growth globally, as their stock prices relied on the development.
While both companies seem to have a similar model, the interim working is different. FT notes that music is highly concentrated, with Just four entities controlling 80% of Spotify's music catalog, while multiple studios produce for TV for Netflix.
Spotify does not own its content, except for its recent podcast. According to FT, Spotify paid $7 billion in royalties in 2021, making just €94 million in operating income on €9.7 billion in revenue. On the other hand, Netflix has become one of the biggest studios in Hollywood with a lot of content it owns.
Spotify's competitors are the big tech like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ: AMZN), and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, which sell similar products.
FT writes that it is challenging for Spotify to raise subscription prices. Netflix, however, has different shows on offer than Walt Disney Company (NYSE:DIS) or AT&T Inc's (NYSE:T) HBO Max.
Spotify's $10 a month subscription is much cheaper than Netflix's $16 a month. Moreover, Spotify also has a free option with advertisements that many users are inclined toward due to rising inflation.
Is Spotify in a worse position than Netflix?
Price Action: SPOT shares closed lower by 12.6% at $96.51 on Wednesday.
Photo by Photo Mix from Pixabay
