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Spotify stock slides as TikTok parent ByteDance weighs music expansion

Spotify stock (SPOT) erased gains on Wednesday after a new report from The Wall Street Journal revealed that TikTok parent company ByteDance has begun talks with music labels to expand its music-streaming service, dubbed Resso.

According to the report, ByteDance wants to eventually integrate the service with social media juggernaut TikTok – a platform known for discovering new music and making songs go viral – as the company looks to expand the offering into more global markets. Currently, Resso is only available in India, Indonesia, and Brazil.

The move would put ByteDance in direct competition with popular platforms like Spotify, Apple Music (AAPL), and Amazon Music (AMZN).

Spotify shares have struggled so far this year, down nearly 65% ​​year-to-date as investors weigh the company’s larger profitability struggles. The audio giant reported second quarter gross margins that disappointed at 24.6%, missing estimates of 25.2% as the streamer spent big on non-music content.

At the same time, monthly active users grew 19% year-over-year to 433 million, 5 million above guidance. Net additions of 19 million represented the company’s largest ever Q2 growth, with expectations set even higher than anticipated for Q3 at 450 million.

Premium subscribers grew 14% year-over-year to 188 million, 6 million above the first quarter’s total and slightly above company guidance of 187 million.

Singer Emil Henrohn attends the EBU & TikTok Party during the 66th Eurovision Song Contest at Museo Del Cinema on May 12, 2022 in Turin, Italy.  (Photo by Stefano Guidi / Getty Images)

Singer Emil Henrohn attends the EBU & TikTok Party during the 66th Eurovision Song Contest at Museo Del Cinema on May 12, 2022 in Turin, Italy. (Photo by Stefano Guidi / Getty Images)

Spotify bets big on podcasts

Amid the increasingly crowded music streaming landscape, Spotify has doubled down on podcasts – revealing during its most recent investor day that it brought in roughly $ 215 million in podcast revenue last year.

As of the end of Q2, Spotify, which boasts high-profile deals from Joe Rogan to Kim Kardashian, had 4.4 million podcasts on the platform – up from 4 million in the first quarter.

CEO Daniel Ek underscored the potential of the platform’s podcast unit, estimating that he expects it to generate margins between 40% to 50%.

Executives continue to preach the long game to investors, even amid difficult macroeconomic conditions.

On the second quarter earnings call, Ek stressed that the company has long-term pricing power, revealing that there’s been “no material impact” on users amid the downturn.

Still, the company is “preparing as if things can get worse” and revealed plans to slow hiring by about 25% in the back half of 2022.

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @ alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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