Spotify

[xoxoxoBruce]

Spotify is in trouble and may die this year.

A major problem is that Spotify simply isn’t making enough money. Go figure. They’re growing fast, but the underlying financials are rotten. “Three to five years ago, you could have an IPO based solely on user growth and promises of the future,” a TechCrunch source relayed.

“But the financial climate has changed now. Today you have to show some path to profitability, especially at the valuation that Spotify has been targeting.”

That might explain why Spotify is frantically trying to renegotiate its major label licenses. Currently, the company is paying at least 70% to the big three: Universal Music Group, Sony Music Entertainment, and Warner Music Group. According to data released last year, Spotify has paid a cumulative $5 billion in royalties since inception, none of which includes overhead, taxes, and guaranteed equity shares (if an IPO occurs).

All of which might explain why Spotify is hemorrhaging cash.

The big problem

But there’s a much bigger problem here. Actually, 1.5 billion of them. Last year, Spotify started taking monster loans, with heavy strings attached. That includes loans of both $500 million and $1 billion, with investors in each pool making hideous demands if an IPO didn’t occur within one year.

And the IPO isn't happening.

[Undertoad]

This story has been met with a yawn, which probably means there are aspects the author has not considered. Meanwhile today

NY Times offers Free Spotify with digital subscription

[Undertoad]

Spotify and Accuweather team up to create "Climatune -- playlists that are based on the weather in your location in real time, and the mood that it creates."

things gettin' weirder

[xoxoxoBruce]

They're up to their necks in that 1.5 Billion and grabbing anything that looks like profit to swing the IPO.

[Undertoad]

Nooo... Spotify is in control of a third of an entire industry right now. The greatest tech companies in the world have been trying to catch it and failing. Apple is failing to catch them and they are the richest company in the world and one that basically made its bones with portable music. (Remember how the iPod was first in all this, before the iPhone and the iPad? How iTunes previously controlled a third of the industry and now does not?)

When everybody in the room wants to dance with you, there will always be someone standing in the dark corner saying you're a loser. Who said Spotify won't make it? One of the dancers? Wall Street Journal?

[xoxoxoBruce]

But for all the nerdy wonderfulness they haven't made a profit. Despite what tw says, big debt and no profit is a bad formula. At minimum, without the profit required for an IPO, it will change hands, and who knows where the new boss will take it.

[Undertoad]

But it's one of those things like Amazon in the 2000s. Do not bother making a profit when all money should be spent managing the growth. T

Also I imagine the IPO will depend on the deals made with the major record labels... and that is probably the real elephant in the room. In that matter Spotify may feel that waiting longer is in their advantage. Spotify has more power over time and if they demonstrate that they have "won" they will be worth a lot more. Let's see what happens!

[Undertoad]

Spotify is 'seriously considering' going public in 2017, but there's a twist

There ya go - a non-traditional IPO

They announced 50 Million paying subscribers (and 50 M ad-supported users). Up from 30 M last year at this time, and more than twice Apple Music's number.

US music industry revenue is up 11% last year. No longer dying! And why?

You guessed it, streaming accounted for more than half of all industry revenues. At this point it is now the focus of the industry.

I mentioned ^ new record company deals. Here's the new deal with Universal. New releases will only be available for paying subscribers for two weeks. Good for Spotify because it pushes people into subscribing. Not good for Universal or its artists, but they haven't figured that out yet.

[xoxoxoBruce]

So they are bypassing an IPO and just putting shares on the Market? the details are behind a paywall.

[Undertoad]

Fuck the WSJ, I've updated the link

[xoxoxoBruce]

Ah, excellent, thank you.

[xoxoxoBruce]

NPR's take on the future of spotify

Now, the writing is on the wall for music fans — if you want to hear what you want to hear when you want to hear it in the friction-free and anywhere-access way you've become accustomed, the time is fast-approaching when you will be required to pay up.

Spotify's deal with Universal (as well as contracts with Warner Music and Sony Music which are still under negotiation) is not the only thing threatening Spotify's free tier. One month ago in Washington, D.C. a byzantine and little-known process, overseen by a panel of three judges named the Copyright Royalty Board, began to determine the rates that Spotify and its competitors will pay not to recording artists or labels but songwriters and music publishers.

Put simply (this part of the music business can induce headaches), this process involves the filing of arguments by companies about how much they should pay to license song compositions — and some of these arguments would all but annihilate Spotify's free tier. Apple, arguing on behalf of Apple Music — which has become Spotify's lead competitor since its launch a little less than two years ago — writes:

"Interactive streaming services do not need to be 'protected.'"

[xoxoxoBruce]

The reasons Spotify doesn't need an IPO.

[Undertoad]

Good morning to this thread! Spotify officially listed yesterday in the direct listing "non-IPO" approach mentioned in that CNBC article.

The direct listing was seen as a test case for other companies tempted to list without selling new shares, and for bankers that could lose out on millions of dollars in underwriting fees for future initial public offerings.

Disrupting bankers, oh noes!

[Flint]

I have observed examples that Millennials have already moved on, past streaming services that offer "new releases" of "licensed" material from "record labels." Music constantly pushes itself into the "piracy" zone.

I'm considering paying for YouTube, so I can make a proper "lo-fi hip hop" playlist. Most of the best songs are unsigned artists creating bootleg remixes.