Sep 18, 2026 · 1h 8m
Spotify’s economics strengthen as Nintendo’s flywheel stalls
$NTDOY: is Nintendo's flywheel actually there? | Accrued Interest
The discussion tests whether Nintendo has escaped hardware-cycle dependence while weighing Spotify’s improving economics against Netflix’s still-substantial growth prospects.
- 1Nintendo’s weaker attach rates, stagnant online accounts, and limited media expansion challenge the idea of a durable flywheel.
- 2Spotify’s label economics, advertising, podcasts, and audiobooks have improved enough to make its earnings power easier to see.
- 3Netflix retains runway in advertising, sports, and linear-TV share, but Spotify offers greater conviction with less streaming competition.
Don't miss
Simeon’s mea culpa on Spotify reframes the episode, as he explains why he underestimated the company’s improving economics and compounding potential.
The brief
Simeon McMillan joins Andrew Walker to challenge Nintendo’s flywheel thesis, arguing that Switch 2 risks, weaker attach rates, and stagnant online accounts still expose a hardware-cycle business.
Nintendo’s brand remains powerful, but the discussion questions whether remakes, older fans, and limited expansion into films, television, parks, and licensing can sustain growth.
Simeon’s Spotify mea culpa becomes the episode’s turning point: better label negotiations, improving podcast economics, audiobooks, and advertising have made the platform’s compounding potential harder to dismiss.
Netflix still has room to take share from linear television and expand through advertising and sports, while AI-generated video may reinforce rather than immediately destroy its content moat.
The investment verdict favors Spotify, whose Netflix-like financial characteristics and reduced competitive pressure give Simeon more earnings visibility than Netflix currently offers.
What was said on this episode
35 statements · 18 positive · 14 negative · 3 neutral
Nintendo remains highly cyclical and dependent on hardware upgrade cycles.
“I think it's incredibly cyclical stock that has not been able to break out of its dependence on the hardware upgrade cycle.”
Listen at 5:17
Nintendo lacks the flywheel needed to escape console cycles.
“the flywheel is not there.”
Listen at 6:17
Nintendo needs stronger Switch 2 software sales to transition audiences.
“they need to sell more Switch 2 software because that's how you bring the audience over to the next cycle”
Listen at 6:52
Nintendo remakes have limited commercial longevity.
“remakes only get but so much juice.”
Listen at 7:32
Nintendo’s higher console prices will reduce demand.
“You're gonna lose some demand.”
Listen at 12:15
Nintendo expects memory costs to remain elevated soon.
“by raising prices so early, Nintendo implicitly told you that they don't see memory costs coming down anytime soon.”
Listen at 13:27
A Switch 2 Lite is unlikely to arrive soon.
“I'm not expecting a Switch 2 Lite anytime soon.”
Listen at 13:32
Zelda resonates less with young children than Mario.
“Zelda doesn't have the same resonance with young kids as Mario does.”
Listen at 14:30
Nintendo is relatively weak in online gaming.
“Nintendo is not known for strong online play.”
Listen at 21:33
Nintendo needs two to three movies annually to build a connected media universe.
“for them to really go in on this whole connected universe, I need to see 2 to 3 movies a year, every year”
Listen at 24:15
Nintendo needs roughly a dozen theme parks and more television shows.
“I need a dozen. I need way more TV shows.”
Listen at 24:30
Nintendo’s strategy primarily monetizes older fans rather than younger generations.
“I think they're maximizing the fans from the '90s.”
Listen at 25:54
Nintendo’s failure to engage younger audiences could hurt it long term.
“I think that it's going to be troubling in the long term for them.”
Listen at 25:57
Nintendo’s partial Pokémon ownership limits its potential upside.
“this is a brand that I wish they owned 100% of.”
Listen at 26:47
Nintendo’s earnings are too uneven to hold for two years.
“right now it's too lumpy for me to hold it for 2 years.”
Listen at 28:36
Spotify’s royalty rate declines as subscriber growth increases.
“Spotify's royalty rate actually goes down the— called the faster they grow, the more subscribers they get.”
Listen at 31:48
Spotify podcasting shifted from loss-making to profitable.
“podcasting went from being like a money pit to a positive one.”
Listen at 35:20
AI is likely a net positive for Spotify.
“I think it is a net positive for them”
Listen at 38:26
Spotify’s rights portfolio enables AI creations unavailable to competitors.
“because they have the rights and the clearance to all the songs and the publishing or whatever, they can do remixes and other sort of AI creations that another company can't do”
Listen at 38:52
Spotify earnings could grow about 20% annually over the next few years.
“I could see 'em growing, you know, actual earnings at at maybe a 20% CAGR over the next couple years.”
Listen at 41:22
Spotify EBIT margins could eventually reach 30%.
“beyond that, it could go to 30%.”
Listen at 41:51
Spotify could deliver 25–35% upside as its multiple rolls forward.
“you could see 25 to 35% upside easily.”
Listen at 42:49
CEOs generally receive too much credit and blame for company outcomes.
“I think CEOs are overrated.”
Listen at 44:32
Spotify faces fewer streaming competitors than five to ten years ago.
“they actually have a lot fewer streaming competitors. Than they used to.”
Listen at 46:44
Netflix is currently a value stock.
“I think Netflix is— it's a value stock”
Listen at 50:39
Netflix operating margins are in the low-to-mid 30s with a path to 40%.
“I think the operating margins at Netflix are in the low to mid-30s with a path to 40”
Listen at 51:42
Netflix is increasingly efficient at monetizing its content library.
“Netflix has gotten incredibly efficient in milking more and more out of the content library that they have.”
Listen at 52:07
Netflix can continue succeeding through an uncool, efficiency-focused strategy.
“Netflix can keep winning on that.”
Listen at 53:41
AI-generated content is not currently a major threat to Netflix.
“I'm actually way less concerned about AI content.”
Listen at 56:34
Actors and unions will seek compensation from AI-generated likenesses.
“the actors and actors unions and the guilds are going to step in to make sure that they get a piece of that”
Listen at 58:24
Netflix can continue taking substantial revenue share from linear television.
“Netflix still has the ability to take a whole lot of money away from television.”
Listen at 1:01:57
Netflix sports rights could support long-term growth through new advertising categories.
“if they can take sports, which they're showing that they can, they can live off that for a long time because it opens up to new ad categories”
Listen at 1:02:10
Spotify offers greater investment conviction than Netflix due to less competition.
“I have more conviction on Spotify because I think that they have a lot of the same financial metrics, same story with less competition.”
Listen at 1:03:51
Netflix could trade at roughly 30 times earnings in ten years.
“I wouldn't be surprised if 10 years from now Netflix is trading at 30 times”
Listen at 1:04:21
Netflix has substantially more strategic growth levers than Spotify.
“Netflix has a lot a lot more levers that they can pull”
Listen at 1:05:09
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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