Spotify, Netflix & Co.: What future do streaming services have?

Streaming has changed the way people listen and watch. Because the competition is fierce and customers are picky, Spotify, Netflix & Co. are no longer growing as quickly.

It is a clear signal when the boss of the music streaming provider Spotify, Daniel Ek, emphasizes that it is no longer just about speed and growth. Rather, Spotify is now focused on streamlining spending and becoming more efficient.

The pressure is high for the top dog in the market for music streaming: In the past year, the Swedish group was in the red in three out of four quarters. For 2022, there will be a net loss of 430 million euros. Spotify has to give a lot of money to the music industry for license rights. In addition, there are high investments, for example for podcasts.

Investors are currently holding back

Many investors are skeptical on the stock exchange, says Stefan Riss, capital market strategist at Acatis Investment: “Spotify has been around for a few years now, and now investors want to see at some point that such a streaming service can actually make a profit – and that is difficult here.”

After all, the number of users continues to rise sharply. Spotify now has around 490 million users worldwide, around half of whom have a premium subscription. However, increasing competition is making it more difficult to win new customers: “Spotify is still in the nice position here that it runs very stably, because we have this special feature in the music sector that people are very loyal,” says Jürgen Seitz, Professor at the Media University in Stuttgart. “In other areas you see fluctuating growth figures, and the companies had to react to that.”

Netflix relies on advertising subscriptions

For example, the video streaming provider Netflix: After a veritable slump in its user numbers, the US group broke with a principle last year and is now offering a discounted subscription with advertising.

With success: Recently, the numbers have increased significantly. Netflix co-founder Reed Hastings says he regrets not starting sooner. Advertising subscriptions are a good tactic. Because then you can offer consumers lower prices.

Big Tech at an advantage

In view of high inflation, many users are considering canceling streaming services that they do not need. Tech giants like Amazon or Apple have an advantage, experts say. Because they offer their services in a “bundle”, i.e. together with other services.

“I’m not particularly confident that companies like Spotify, but also Netflix, will be able to become very profitable because there’s a lot of pressure from other players who can consolidate,” commented industry insider Seitz.

Not every streaming service will survive this. Spotify & Co., for example, are trying to save costs by cutting jobs. In any case, the industry has not yet been completely written off on the stock exchange, because here too, nobody can imagine a world without music or video streaming.