Spotify shares sank 7.4% to $317.10 on Friday (Jan. 15) after a Citi analyst downgraded the stock after concluding that the streaming service’s podcasts have not had a positive impact on subscriber growth. The price recovered slightly over the day and closed at $317.81.

Citi analyst Jason Bazinet believes Spotify is the only one of four subscription stocks — Netflix, SiriusXM and Roku are the others — with a price that’s out of sync with its valuation. “We suspect this disconnect stems from recent enthusiasm around Spotify’s recent podcast pivot,” he wrote. Bazinet dropped his rating from neutral to sell while raising the price target from $270 to $310, 2.2% below Friday’s closing price.

Spotify’s share price was already in retreat, dropping 12.5% from an all-time high of $370.95 reached on Wednesday (Jan. 13), however. Some experts would argue it’s still too high. The 25 analysts covering Spotify have a median price target of $298.53 with a high of $425.90 and a low of $141.30, according to Refinitiv.

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Key Takeaways:

1) The three leading audio streaming companies — Spotify, Apple and Amazon — are pushing hard into podcasts. If turning a music service into an all-around audio service attracts subscribers and reduces churn, record labels and publishers will benefit.
2) Regardless of how its podcasts perform in the next year or two, Spotify has the resources to see its strategy through. It had €1.18 billion ($1.43 billion) on its balance sheet on Sept. 30, 2020, enough for more acquisitions and production expenses for original content.
3) Spotify lacks a bundle. Apple can fold a podcast subscription into Apple One or offer a standalone music-podcast bundle. Amazon has the opportunity to bundle podcast and music subscriptions.

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Also on Friday, news broke that Apple is planning a podcast subscription service that would compete with a similar offering Spotify is reportedly mulling over. The Information’s report, corroborated by Bloomberg, reveals Apple is intent on following Spotify’s lead in switching its focus from a music-focused platform to one with both music and spoken word. Apple already has a popular podcast app but does not own the content it distributes. Amazon, often overlooked in discussions about audio streaming, already has a podcast subscription business — $4.99 per month or $34.99 annually — through its acquisition of podcast producer Wondery in December 2020.

Becoming an audio platform is a sensible and unavoidable move. Podcasting has the opportunity to expand Spotify’s listening hours, make the product stickier (less churn makes the average user more valuable) and improve gross margin (not because labels will lose negotiating power but because owned podcasts offer advertising opportunities). Since labels no longer give streaming services exclusives, podcasting is the favored format for luring listeners with titles that are unavailable elsewhere. And while streaming services are uninterested — thus far — in becoming record labels, they have quickly built in-house podcast production.

With Apple and Amazon on its heels, Spotify might struggle to maintain its top position in the market. Not only must it compete on music features, podcasting could drag it into a margin-killing pricing fight. Amazon continues to make a push in music streaming with Amazon Music HD, a high-definition tier for only $12.99 per month in the U.S. for Prime members, and leverages its popular Echo smart speaker with less expensive streaming options. Apple includes Apple Music in Apple One, a bundle with Apple TV+, its Apple Arcade game package and iCloud. It could fold a podcast subscription into Apple One or offer a standalone music-podcast bundle. Spotify is a standalone company facing two of the world’s largest tech companies. At best it can continue to partner with other companies that have no streaming counterpart like Hulu, with which it once had a $9.99 available in the U.S.

The three streaming leaders have taken varied approaches — buy or build — to enter the music and audio markets. Apple is creating its own podcasts but bought Beats Music and re-built it into Apple Music. Although Spotify and Amazon Music were built from scratch, both companies have used established brands to kickstart their podcasting businesses. Spotify acquired The Ringer and Gimlet and licensed The Joe Rogan Experience; Amazon acquired Wondery, producer of shows such as Death of a Starlet, and has an exclusive with the popular music-based show Disgraceland. Back in 2008, Amazon broke into the audiobook market with its $300 million acquisition of Audible.com.

Other companies have a good foothold in podcasting. iHeartMedia’s original shows include The Ron Burgundy Podcast, in which actor Will Ferrell reprises his character in the movie Anchorman; comedian Chelsea Handler’s Life Will Be The Death of Me and Stuff You Should Know. NPR has a formidable lineup of interview and news shows. Pandora has an exclusive podcast, 17 Weeks, from parent company SiriusXM and UNINTERRUPTED, a brand founded by NBA player Lebron James, and another about rap icons Wu-Tang Clan. And The New York Times has the popular show The Daily and recently acquired Serial Productions, the company behind the hit podcast Serial.

Investors’ enthusiasm about podcasts helped launch Spotify’s share price 109.3% over the last 12 months, from $151.84 to Friday’s close of $317.81 — for a market value of $60.3 billion. Since its pandemic low of $109.18 on March 16, Spotify’s share price is up an astounding 239.8%. Both gains far exceed the broader market: over the last 12 months, the New York Stock Exchange and the tech-heavy Nasdaq have climbed 5.3% and 38.9%, respectively. Spotify has even bested the top on-demand video streaming company during a year of pandemic-fueled growth: Netflix, a main benefactor of shelter-in-place orders, is up 47.1% over the last year.

Spotify versus Apple and Amazon isn’t necessarily a story of David versus two Goliaths; Spotify is a goliath in its small section of the e-commerce market. For a decade it focused on building the best music service — no in-house ticketing, livestreaming or record label. The focus has changed to being the best audio streaming service, and the ultimate goal of gaining subscribers remains.

And we’re back! After a weird start to the new year, the fact remains that dance music has the power to not just distract, but uplift.

So far, 2021 has seen releases from the legend Paul Kalkbrenner, who delivered a deep house slow burn inspired by watching Sesame Street as a boy in East Germany, a squelchy electro banger from heavyweight duo deadmau5 and Wolfgang Gartner, a tech house body-mover from Green Velvet and CamelPhat and all the new music below.

Ready? Let’s dig in.

Black Coffee & Diplo feat. Elderbrook, “Never Gonna Forget”

Frankly, there aren’t enough dance tracks that evoke the steamy feeling of the 1989 Chris Isaak classic “Wicked Game.” South African star Black Coffee and a pair of heavyweight pals are here to amend that with “Never Gonna Forget You,” a spacious house track built on a moody guitar lick Isaak would likely approve of, which sits beneath pretty, delicate layers of percussion and synth. Featuring Grammy-nominated vocalist/producer Elderbrook and Diplo — showing up here in his underground-oriented Higher Ground persona — “Never Gonna Forget” is the final single to drop because the Feb. 5 release of Black Coffee’s forthcoming LP, Subconsciously.

LP Giobbi feat. Hermixalot, “Move Your Body”

Oregon-born, Austin, Texas-based producer LP Giobbi returns with her frequent collaborator Hermixalot, and together the duo deliver some serious (like, dead serious) heat. “Move Your Body” is a gospel house epic laden with strings, breakbeat, swirling synth and piano stabs played by the producer/classically trained jazz pianist herself. LP Giobbi’s debut release on Insomniac Records, Hermixalot’s potent vocals instruct you to “Dance until your physical becomes the instrument that renews the spiritual!” It makes sense when you do it!

Anturage & Alexey Union, “Bad Romance”

Disco Halal, Tthe label from Israel-born, Berlin-based producer Moscoman, has been delivering a consistently excellent streak of projects that continues today with the single “Bad Romance.” A collaboration between Bulgarian producer Anturage and Russia-based artist Alexey Union, the track fuses elements of Darkside and Depeche Mode, making something urgent and alluring. The release also features a host of remixes, along with an extended edit from the frequent collaborators.

CamelPhat feat. Lowes, “Easier” (Sub Focus Remix)

CamelPhat’s massive 2020 anthem “Easier” get an equally massive remix from scene hero Sub Focus. The English producer’s edit speeds up the original and reconfigures it with the high-energy D&B element that’s made him famous, adding a bit of brightness and a lot more urgency. The remix package also includes an edit by house legend MK, along with an acoustic version of the track.

Illenium, “Hearts On Fire” (Timmy Trumpet Remix)

After dropping his Lights collaboration “Hearts On Fire” on Christmas Day, Illenium does a quick follow up with a remix by mainstage stalwart Timmy Trumpet. In Trumpet’s hands, the singalong future bass anthem get the syncopated EDM bounce that’s made him a worldwide favorite. This remix comes ahead of additional “Hearts On Fire” edits coming from Lucas & Steve and Bassjackers later this month and in early February.

Rochelle Jordan, “Got Em”

British-born, Los Angeles based producer/singer Rochelle Jordan makes her debut on Tokimonsta’s Young Art label with the scintillating “Got Em.” Co-produced by KLSH and Machindrum, the track’s UK garage bassline lightly evokes Daniel Bedingfield’s 2001 classic “Gotta Get Through This” and serves to showcase Jordan’s simultaneously robust and feathery voice.

“I wrote it in 2017, a time where I had an intense epiphany about life,” Jordan says in a statement. “I started to become much more spiritually aware than I have ever been before. All the repetition in this song is my way of being able to meditate on these words of encouragement and confidence, affirm and push through. Talking my shit in the first verse, to speaking and encouraging whoever is listening in the second, I just wanted this song to seep into the veins of whoever needs to be lifted.”

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RCA’s leadership changes announced earlier Thursday (Jan. 14) reflect the label’s decision to “lean further in on hip-hop and R&B,” RCA chairman and CEO Peter Edge tells Billboard.

Mark Pitts rises from RCA’s president of urban music to RCA Records president, while John Fleckenstein – who has served as co-president with Joe Riccitelli since 2018 — has been upped to chief operating officer. (Riccitelli is exiting the company.)

Pitts has had a pivotal role in signing, developing and advancing the careers of many R&B and hip-hop artists throughout his more than 25 years in the industry, including The Notorious B.I.G., Usher, Miguel, J.Cole and Chris Brown, and has led the label’s efforts to usher in a new generation.

“We’ve been one of the leaders in R&B for quite a few years, that’s not new territory for us,” says Edge, citing SZA, H.E.R., Bryson Tiller, Khalid, and Jazmine Sullivan’s resurgence. “We’ve been in the middle of that and we’re going to be building more of a hip-hop roster.” RCA is already experiencing break-out moments with female rappers Flo Milli and Mulatto, both of whose debut projects spawned gold certified singles.

Edge stresses that despite the lean in, RCA, home to acts like Foo Fighters, P!nk and Alicia Keys, will continue to sign acts of all stripes, heralding burgeoning singer-songwriter Tate McRea and her success with “you broke me first.” “If an artist is great, I don’t get stuck on genre,” he says.

Other moves in the restructuring included the departure of Riccitelli, who was well regarded as a top radio promotion executive. RCA will continue to work with Riccitelli as a consultant.

Many labels find themselves rethinking their radio promotion strategy as the largest terrestrial radio programmer, iHeartRadio switches to more centralized programming and, more importantly, streaming becomes a bigger part of the listening experience.

“We have to approach promotion in a broader fashion,” says Edge of the evolution that has been progressing over the last several years. “The truth about how records are breaking is it’s not just radio, radio plays a part, but it’s social media, DSPs, TikTok. It used to be go to radio and get your record played and have a hit. Now there’s many different ways to get a hit. We have to evolve and put resources into digital marketing and promotion in addition to radio and have a broader view.”

Edge declined to address if any other specific changes were coming in the radio promotion division, saying, “we’re still in radio promotion, but we’ve diversified in all aspects. We’re taking a few different tacks instead of focusing so heavily on radio alone. It’s about getting your audience.” He also notes the importance of terrestrial radio in strong hip-hop and R&B communities like Atlanta and New York, where “there is a strong culture around the mix shows and morning shows.”

In an earlier, previously announced change, executive vp/GM Geo Bivins left the company in December. Edge says his position will be filled from within and expects to make an announcement next week.

RCA’s overall market share in 2020 was 4.66%, compared with 5.18% in 2019, according to MRC Data, while current market share dipped to 3.57% in 2020 from 4.38%.

Grammy best new artist nominee Doja Cat provided RCA with its top-selling album last year. Her Hot Pink album moved 845,000 album consumption units in 2020, according to MRC Data.