The Stocks That Win From TikTok’s Unexpected Retreat

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Key Points:

• TikTok exits the music streaming business, creating opportunities for competitors.
• Spotify likely benefits most from TikTok's departure.
• TikTok's younger user base may not have been interested in paid music streaming.
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Lee and Doug discuss TikTok's surprising decision to exit the music streaming business, despite its potential given TikTok's massive user base. They note that this move is a significant win for competitors like Spotify (NYSE: SPOT) and Apple Music, as TikTok's users can easily transfer their playlists to these platforms. They also mention that the music streaming market is highly crowded, with major players like Amazon (NASDAQ: AMZN) , Google (NASDAQ: GOOG) , and YouTube in the mix. Doug suggests that while Apple (NASDAQ: AAPL) is too large to see a major impact, Spotify could be the biggest beneficiary of TikTok's exit, making it a good option for investors to consider.

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TikTok, which at this point could be the most widely used social media network.

They don't put out exact numbers.

As people know, they're owned by a Chinese company, so maybe they don't want to put out exact numbers.

But a massive business, certainly globally, hundreds of millions of users in the United States, many tens of millions.

Yeah, they have decided to get out of a business that would appear to be attractive for them because it's basically video sharing.

TikTok is, they had a music streaming business, right?

Because of their capacity, people who use TikTok, you would think, wow, that would be a great business, but they have just dropped out.

And the question is, who's the winner if they are the loser?

Yeah.

Well, and it's interesting, but again, you got to remember a lot of the TikTok users are the young, and many are teenagers.

And, you know, I don't know how many teenagers stream music, but I thought it was interesting simply because they went pretty hard and heavy into this just two years ago.

And their dropping out is a huge boon to Apple Music and probably most importantly to Spotify.

Because apparently I read that you can take your manufactured lists and your manufactured albums, music that you have saved, and you can transfer that directly to a Spotify or to an Apple Music.

And one would think that Spotify will say, well, okay, well look, we'll give you a deal to come over.

Because Spotify is actually finally starting to get close to making consistent money.

And it's, it is a good service for the price.

But the mere fact that they bailed after two years indicates that the demographic that supports TikTok is clearly not the people that are willing to pay, you know, eighteen dollars a month for music streaming.

I think that's part of it.

I think the other part of it is, is that the music streaming business is crowded.

People very well think about that.

They think that video streaming is crowded, but people need to remember that Amazon offers music.

I mean, a lot of these big companies that have streaming or in the tech industry, they offer audio streaming, podcasts, music streaming.

So I think it is very good for Spotify particularly, but Spotify is not on its own.

It's not as if, this eliminates the competition.

It just eliminates one important competitor.

Yeah.

And, and again, and like you said, Doug, Google has a piece.

They have a piece of it because they have YouTube and YouTube has a ton of streaming music and you can build, you know, music lists on YouTube as well.

So yeah, it is an extremely crowded arena.

You would think again, TikTok would have had an advantage, but again, you know, does a seventeen or sixteen year old kid that's listening to Taylor Swift all the time really stream, you know, vast amounts of music?

My guess is I don't know anybody that age, so I can't.

But not well.

So listen, if I'm an investor right now, I would look at Spotify.

Yeah, I think so.

You know, with Apple, even if they pick up some of these people, Apple's so huge, it doesn't move the needle.

It is Spotify's bread and butter.

And I think that, yeah, if there's any place that's going to get a distinct advantage immediately, and you would think again, that TikTok will, you know, when these lists are offered off, they will be easily transferred through the internet and easily plugged into your account and Spotify.

And it, you know, everything will work pretty quick.

Yeah.

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