TikTok Merging With Spotify?
TikTok parent company ByteDance has publically alluded to its desire to merge with Spotify, however, there has yet to be an official confirmation that this will happen.
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TikTok is the undeniable rising star for social media industry platforms in the pandemic age. Now, TikTok’s parent company ByteDance is looking to merge with Spotify to expand music distribution and streaming globally. This comes after years of the video platform wanting to integrate music with its social media production, which includes upcoming plans to partner with music streaming companies for users in Asia.
According to a report from the Wall Street Journal, ByteDance is planning to merge its short-video platform with music streaming, hoping to make the site a new home for worldwide music sharing. Though the possible merger with Spotify alluded to this past Wednesday, no significant changes occurred for TikTok’s shares in the stock market. Other notable music companies have been gaining financial traction on their stock, including Warner Music Group Corp, whose stock went up by 4% in after-market trading.
ByteDance has yet to respond to a request for comment about the possible merger. It is publically known that the company is looking to expand its music-sharing abilities, examining other platforms for a potential partnership. ByteDance discussed initiating a Resso music-streaming service in different countries worldwide, which includes India, Indonesia, and Brazil, but expanding to North America hasn’t been part of this proposition.
Investors in the market are worried about how ByteDance will fare in a music-sharing industry that Apple Music and Amazon Music dominate. Even if it integrates Spotify, the worldwide streaming platform has dropped in its share value since early 2022, which has dipped over 65% during the fiscal year. Spotify’s second quarterly earnings report missed the estimated target, with gross margins falling to 24.6% instead of the expected 25.2%.
Even though Spotify’s market shares diminished in 2022, it’s still gaining users daily. This year, monthly active users have grown by 19% to 433 million, which is five million more than analysts estimated. Premium subscribers also increased this year, with a 14% year-over-year uptick to 188 million users.
One of Spotify’s key demographics is not music listeners but podcast enjoyers. The platform has been instrumental in providing ample podcasts to available streaming and has made a considerable profit from doing so. Over the last fiscal year, Spotify accumulated $215 million in podcast revenue, with more than 4.4 million podcasts on the platform.
Though Spotify CEO Daniel Ek purported massive gains from podcasts and premium subscribers, executive action at the company tells a different story. A few months prior, the executive team revealed their newest hiring strategy, which was to reduce hiring by 25% in the latter half of 2022. This has caused concern in the stock market and investors, believing that Spotify’s CEO may be reacting to financial strain that hasn’t been publicly reported.
A merger between TikTok and Spotify could position both companies for extensive financial success. Since Spotify’s stock market value isn’t increasing, a partnership with a successful social media platform could bolster interest from investors. ByteDance has already initiated plans for music-sharing alliances in other countries worldwide, making a merger likely to occur for American audiences sooner rather than later.
