Shares of streaming music service Spotify fell Monday as investors grew nervous about a report suggesting that Amazon.com was preparing to launch a free, ad-supported music service.
Spotify (SPOT) stock, up roughly 20% in 2019, was recently down 3.8% to $139.50 following the publication of a Friday story by Billboard that said the Amazon music launch could happen this week. Amazon shares were trading essentially flat Monday afternoon, at $1,841.
Amazon (AMZN) didn’t respond to Barron’s request for comment in time for publication; a Spotify spokeswoman declined to comment. Some details were unclear, among them whether the new Amazon service would be marketed beyond Amazon’s Echo speakers.
Amazon’s Prime Music offers two million a la carte songs to subscribers of its Prime service. Its Music Unlimited has a much bigger library for an $8 monthly fee. Spotify, meanwhile, has a $10 premium product, as well as an ad-supported free tier seen as a subscription funnel.
For Spotify, the Amazon news comes amid concerns that it might get squeezed by the fees it pays artists—as well as competitive pressures not only from Amazon, but from Apple (AAPL), which according to reports recently managed to top Spotify’s U.S. paying subscriber count.
Spotify has begun pushing back against what it sees as anticompetitive practices at Apple’s app store.
In a note to clients on Monday, Raymond James analyst Aaron Kessler offered some context on Amazon’s competitive threat to Spotify:
“As with any action by a large technology company, Spotify is trading down on the news. We would stress, however, that 1) Amazon lacks penetration on smartphones, the primary listening device, and 2) Amazon’s services have limited traction internationally. In short, a new service would make the U.S. more competitive but have relatively little impact to the 70%+ of Spotify’s users located internationally.”
Spotify’s stock got a boost last month after reports of a strong launch of its India product. The company’s annual meeting is Thursday, and its next quarterly financial results are expected in May.