Can Spotify Maintain Its Dominance After Daniel Ek’s Departure as CEO?

If Spotify’s announcement that co-founder and CEO Daniel Ek is stepping down and naming his successors looks familiar, it’s due to the fact that Netflix did the nonstop aforesaid happening astir 3 years ago. And conscionable arsenic Netflix thrived successful its post-Reed Hastings years, Spotify is good situated for its post-Ek era, according to experts.  

On Jan. 19, 2023, Netflix co-founder and CEO Reed Hastings announced his modulation to enforcement president and the assignment of co-CEOs Ted Sarandos and Greg Peters. The caller leaders had been prepared for their caller roles. In the 2 and a fractional years earlier Netflix’s announcement, Hastings had delegated much responsibilities to Sarandos and Peters, who had each been with Netflix for 15 years. The determination to enforcement chairman, Hastings noted successful a blog post, had been taken by Microsoft laminitis Bill Gates and Amazon laminitis Jeff Bezos earlier him.  

Strikingly akin quality arrived connected Tuesday (Sept. 30) erstwhile Spotify announced that Ek volition go enforcement president and beryllium succeeded by co-CEOs Alex Norström and Gustav Söderström. Like Sarandos and Peters, Spotify’s caller co-CEOs were groomed to instrumentality the reins from a founder/CEO who had go synonymous with the company’s brand. And similar Netflix’s thoughtful succession plan, Spotify’s effort to regenerate Ek was a semipermanent project. Woody Marshall, pb autarkic manager connected Spotify’s board, said successful a statement that the committee “has been moving intimately with [Ek] connected the improvement of Spotify’s enactment operation for respective years.”  

The similarities shouldn’t beryllium surprising. As J.P. Morgan analysts noted successful a Sept. 30 enactment to investors, Sarandos holds a spot connected Spotify’s committee of directors, and the companies person a communal capitalist successful task superior steadfast Technology Crossover Ventures, which provided early-stage maturation superior and continues to ain shares successful some companies. These relationships “should assistance guarantee a creaseless modulation and continued beardown execution” astatine Spotify, analysts wrote.  

The market’s reactions to the Spotify and Netflix succession plans were different, though. Netflix’s stock terms jumped 7.8%, though notably, the announcement coincided with the company’s Q4 2022 quarterly net release, successful which the company’s nett subscriber additions exceeded its guidance. On Tuesday, arsenic the marketplace absorbed Spotify’s quality successful the lack of immoderate affirmative fiscal data, its stock terms fell 4.2%, shaving disconnected astir $6.2 cardinal of marketplace value.   

Is a alteration successful CEOs worthy a $6 cardinal deed to Spotify’s value? If Netflix’s trajectory since Hastings’ departure is immoderate indication, Spotify volition proceed to regularisation the audio subscription business. Since Hastings stepped down arsenic CEO, Netflix’s stock terms has risen 240%.  

Sarandos and Peters person accrued Netflix’s marketplace dominance and taken the institution successful caller directions. Netflix, agelong a subscription-only platform, successfully grew the ad-supported tier it launched successful 2022. The maturation of its advertizing concern has enabled its foray into unrecorded sports, specified arsenic NFL games that see the accepted commercialized breaks, adjacent for subscribers to Netflix’s ad-free plans. The institution is besides financially healthier, with existent margins and profitability amended than during Hastings’ tenure arsenic CEO. 

Norström and Söderström could travel a akin trajectory of measured gambles and fiscal discipline. Under their leadership, Spotify volition — probably, based connected nationalist comments — motorboat a superfan tier and unlock further user spending. Like Netflix, Spotify volition go a much planetary work and summation subscriptions successful processing markets that presently thin toward free, ad-supported listening. The duo is besides inheriting a institution that has vastly improved its margins implicit the past mates of years, and which can, experts predict, rise prices adjacent further without alienating existent oregon aboriginal subscribers.  

Equity analysts judge Spotify’s caller leaders are up for the challenge. Guggenheim analysts called Norström and Söderström, who person been with Spotify for 14 and 16 years, respectively,...