29 ms·

Spotify opens on NYSE, valuing company at almost $30B

692 points by harshgupta 9y ago

JumpCrisscross 9y ago
Contrasting this offering, where there were no underwriters and things proceeded spectacularly, with the Dropbox IPO, where the underwriters added negative value, speaks profoundly to the future role of private markets in the capital markets for technology companies. Disclaimer: I bet my career on private markets supplanting public ones, in respect of certain technology companies, many years ago.
- fullshark 9y ago
  I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?
  - jedberg 9y ago
    My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra. In theory the service they provide is valuation, but in this day and age of instant information, that really isn't necessary anymore. Back in the day when it took a few days for a person to execute a trade, maybe they provided valuable insight, but now, with stock trades for retail investors taking seconds from "I want that" to "I have that", they don't really have better information anymore.
    - chimeracoder 9y ago
      > My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra. That's typically not true. The underwriter isn't guaranteed the difference. They're basically an insurer: the company is able to know (before the IPO) exactly how much money they can expect to make on it. In exchange for this certainty, the forego the potential upside (the chance that the opening price will be much higher, in which case the company is leaving money on the table). In this case, Spotify isn't even raising any money (because this is a direct listing, not an IPO), so there's no point for underwriters, because... well, there's no uncertainty about how much money they'll be raising, since they're not raising any.
      - jedberg 9y ago
        That's what I thought too, but someone from the investment banking industry corrected me the last time I said that, and pointed out that "banks never lose money", and that the company does eventually have to repay them.
        chimeracoder 9y ago
        Underwriters aren't gatekeepers by definition, because there's nothing preventing companies from foregoing underwriters. But almost every single company that goes public chooses to[0], because they gain significant value from the process. There are a few exceptions - Google is the most famous one. But they're rare, and even Google ran into trouble with theirs - they literally had to cut the size of the amount they raised in half about a week before the IPO, because the demand was lower than they thought, and then ended up leaving a lot money on the table. We forget about all of that today because Google is now a successful public company. But their IPO was unambiguously a disaster from the company's perspective - they would have raised much more money with a conventional process. > That's what I thought too, but someone from the investment banking industry corrected me the last time I said that, and pointed out that "banks never lose money", and that the company does eventually have to repay them. No, that's not true. If the IPO is undersubscribed, the company isn't liable for making the bank whole. If that were true, then yes, there would be literally no reason for a company to use an underwriter, because there's no requirement to.
        jedberg 9y ago
        > because there's nothing preventing companies from foregoing underwriters. Isn't that like saying "there is nothing that prevents you from using highways"? Like sure, you don't have to use an underwriter, but, as you pointed out with the Google example, it won't go well for you if you leave them out.
        chimeracoder 9y ago
        > Like sure, you don't have to use an underwriter, but, as you pointed out with the Google example, it won't go well for you if you leave them out. Well, the original claim was that underwriters provide negative value. There's a tradeoff, but clearly they do provide positive value, on net.
    - JumpCrisscross 9y ago
      > If your stock underperforms, you have to pay them back You're referring to the greenshoe [1]. Suppose a company is selling 100 shares at $100 per share. The underwriter will collect orders for 115 shares at $100 per share. This puts them in a natural short position. A greenshoe lets the underwriter buy up to 15 additional shares from the company at $100 per share. If the price goes up to $105, they exercise the greenshoe. They buy 15 shares from the company at $100 and deliver them to the buyers to whom they sold shares they didn't have. If the price goes down to $95, they buy those shares (leaving the greenshoe un-exercised) and deliver them to the buyers to whom they sold the shares at $100. [1] https://en.wikipedia.org/wiki/Greenshoe https://en.wikipedia.org/wiki/Greenshoe
  - chimeracoder 9y ago
    > I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management? Yes, and furthermore, the Spotify listing is anomaly in a lot of ways due to the idiosyncratic terms under which they raised money previously, and the fact that the major labels (who are their primary vendors) had ownership stakes in them from the very beginning. In IPOs, companies raise money, and underwriters serve as insurers to guarantee the amount that the company will raise. But Spotify isn't even raising any money today! They're just providing liquidity for existing shareholders. That's dramatically different from IPOs, so of course the underwriters are superfluous for this particular case. I don't think it makes sense to generalize anything from Spotify, but certainly not the role of underwriters.
  - eganist 9y ago
    Well, that and aid with the capital raise. In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions. Edit: yep. > The digital music company isn’t selling its shares on the stock market, meaning the company isn’t raising any money today. Instead, the event known as a “direct listing,” is a collection of transactions from existing shareholders (like employees and investors) selling shares directly to stock market investors. It took a while for the market makers to sort this out.
    - chimeracoder 9y ago
      > In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions. Yup, Spotify was under contractual requirements to go public, due to the terms of their last fundraising round (or else they had to pay incredibly stiff penalties). Underwriters serve a role for most IPOs, but Spotify is different because their listing wasn't about raising money - it was about fulfilling their contractual requirements to provide liquidity on public markets so that they could avoid the penalties they would otherwise face.
      - JumpCrisscross 9y ago
        > Spotify was under contractual requirements to go public, due to the terms of their last fundraising round Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language.
        chimeracoder 9y ago
        > Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language. To be specific: they did a DLP, not an IPO. Underwriters make sense for IPOs, because the company is raising money. There's no point to an underwriter in an DLP, because the company isn't raising money. They were not under requirements to hold an IPO; they were required to provide public liquidity to their shareholders. That's why they chose a process that involved no underwriting. And that's also why their case doesn't really provide any generalize lessons, because those types of terms are incredibly rare in growth-stage venture financing.
  - JumpCrisscross 9y ago
    > Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management? IPOs have (a) companies issuing stock, (b) private investors selling stock and (c) public investors pricing an asset never before continuously priced. All this happens simultaneously. If the ball drops on one, it drops on them all. Underwriting is a good way to manage that risk. Private markets challenge that simultaneity. Instead of selling into the IPO, companies can sell some in the private markets and some after going public. Instead of having every insider sell on opening day, they can sell in private secondaries and then after the lock-up. That leaves element (c) isolated. That's difficult--Spotify still hired bankers--but it doesn't need underwriting. Another way to look at it: three services were bundled into the traditional IPO. Bankers charged richly for the bundle. Private markets give companies the option, to dis-assemble the bundle and price and time them separately.
- jartelt 9y ago
  Spotify paid bankers roughly 40 million euros to run this direct listing and did not raise any additional funding in the process (because it's not really an offering). Dropbox paid bankers about the same amount in fees and was able to raise a bunch of capital in the process. I wouldn't necessarily call one of these events spectacular and the other not spectacular. They are just different...
  - JumpCrisscross 9y ago
    > Spotify paid bankers roughly 40 million euros to run this direct listing and did not raise any additional funding in the process (because it's not really an offering). Dropbox paid bankers about the same amount in fees and was able to raise a bunch of capital in the process Agreed--the comparison is enough to spring a reasonable hypothesis, nothing more. That said, Spotify is a large foreign lister; Dropbox is a small domestic seller. I'm not advocating the death of underwriters. They're a necessary part of the ecosystem. What we're seeing here is a broadening of the options available to the ecosystem. That's new, and that's good.
jiggunjer 9y ago
How much are the investment bankers earning on this?
- jedberg 9y ago
  Edit: Apparently I was wrong, they still paid a bunch of bankers for advice, but technically they aren't making anything by skimming off the top like most IPOs. I think nothing. It's a direct sale, so the insiders (including the employees, not just the execs) get to sell however many shares they want directly to public shareholders. So the company doesn't make any money either, just the shareholders. I suppose at some point the company itself could sell shares, and then maybe a banker would get involved, but since it would already be publicly listed, I'm not sure they'd have to be.
  - jonknee 9y ago
    They're actually making more from Spotify's direct listing than they did for Dropbox's full on IPO... So much for disrupting the business model! https://www.bloomberg.com/news/articles/2018-03-26/spotify-listing-disrupts-the-ipo-but-keeps-the-costs https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...
  - ProAm 9y ago
    Interesting, is this just to let shareholders cash out? Im surprised they would do this without making any (or at least a little) money on it given the track record. Seems risky when they are still beholden to the lables for the most part.
- nfriedly 9y ago
  I think it was somewhere around $30 million spent on bankers for the non-IPO. (Which I guess is less then what they would have spent on an actual IPO? Although in that case, the cash raised from the IPO would have paid for the banker expenses.) Edit: this is where I got the $30 million figure from: https://www.bloomberg.com/view/articles/2018-01-16/spotify-will-pay-banks-to-cut-out-the-banks https://www.bloomberg.com/view/articles/2018-01-16/spotify-w...
- 9y ago
verelo 9y ago
So i bought in, who knows where this will go though :) One of my hopes it that just like NFLX, once the company focuses on producing / licensing it's own content they can do really well. I'm interested in hearing what others have to say on this! Did you buy, will you buy? Why?
- browie 9y ago
  I don't know much about buying shares but I would like to buy in and invest. Care to give me feedback on that? Where did you buy in?
  - praneshp 9y ago
    I don't know too much about buying shares, but anyone that knows less than even me should not be buying individual stocks (that too based on IPO day hype). https://www.bogleheads.org/wiki/Getting_started https://www.bogleheads.org/wiki/Getting_started
    - KozmoNau7 9y ago
      Absolutely. Buy index funds, don't worry so much about fluctuations, keep a long-term perspective.
      - verelo 9y ago
        I agree with the above two remarks. In my situation the money i “experiment” with at an individual stock level is not relevant to my end of work plan. I assume the spend is as healthy as buying a sports car, and while I’d love to be wrong, I’d encourage you to buy index funds and treat individual stock picks in the same manner.
  - verelo 9y ago
    Yeah i have no good advice other than to buy into the indexes. If you’re picking stocks it better be for fun, in my case that’s what it is.
- 9y ago
froindt 9y ago
Maybe my perception is off, but it seems like we're getting lots of tech IPO's in a relatively short time. Stitch Fix, Dropbox, Blue Apron, Snap, and Roku to name a few. For a long time we weren't seeing too many big tech IPO's. Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?
- overcast 9y ago
  Remember what the stock market charts looked like last time? Stockpile some cash, invest when it falls out.
  - deleted 9y ago
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- albertgoeswoof 9y ago
  Are blue apron and stitch fix tech companies? I thought they were just sending out boxes of stuff to subscribers, with a website/app for taking orders?
  - meritt 9y ago
    Is Spotify a tech company? I thought they were just sending an audio stream to subscribers with a website/app for searching?
    - harshgupta 9y ago
      Spotify is a tech company by all measures. Their core value propositions - recommendation engine, UI/UX, scaling responsive applications - those are pretty 'tech' problems.
      - deleted 9y ago
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      - 9y ago
PaulHoule 9y ago
This has investment bankers quaking in their boots.
- wweidendorf 9y ago
  Not even remotely - they made out better on this than other recent IPOs. They are paying 35 - 40 euros or ~$45 million at the midpoint. If they float $1 billion in shares today, that means fees are 4.5% of the overall “offering”, or almost exactly what Dropbox paid. https://www.bloomberg.com/news/articles/2018-03-26/spotify-listing-disrupts-the-ipo-but-keeps-the-costs https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...
- timkpaine 9y ago
  1. Snapchat was listing, not raising capital. Until we see a similarly high-profile company try to raise equity (and I doubt we will), there's no reason to worry for IB. 2. If a client wants to buy/sell snapchat, the investment bank is still going to make broker fees on the transactions.
swypych 9y ago
Spotify Revenue (Euros) 2017 4.09 billion 2016 2.95 billion 2015 1.94 billion Net Loss (Euros) 2017 1.2 billion 2016 539 million Impressive revenue growth, but I can't understand the valuation given the losses. I love their product though.
- zer00eyz 9y ago
  The value, well it is "investor demand" The going public part -- well that was foretold with their last round of financing (it was a condition) and this was a strange way to do it. You may love the product but will it last is the question. If I were going to bet I would say that 5 years down the road someone buys it for pennies on the dollar or it goes bankrupt due to toxic debt. I wonder what the short position is on it.
  - TAForObvReasons 9y ago
    > this was a strange way to do it. This was done partially because the company itself isn't raising money. If the company executives believed they would need a large cash cushion, they would have tried to raise some cash in the deal, so they must believe they can reverse course before the cash crunch
    - zer00eyz 9y ago
      It wasn't about raising money - they had their hand forced by the last round of debt/equity deal that they did: https://www.recode.net/2018/1/3/16847786/spotify-tpg-tencent-debt-dragoneer-ipo-music-streaming https://www.recode.net/2018/1/3/16847786/spotify-tpg-tencent... Not that it is a great article but honestly that looks like a very messy transaction. It also looks like Spotify got the raw end of that deal. The whole thing is just crazy and I'm not sure how anyone can make sense of those numbers.
  - ikeaman 9y ago
    I know they didn't go through a traditional IPO model, but from what I understand there's always a certain amount of days imposed by the SEC to restrict short selling on novel securities.
fortythirteen 9y ago
> The company says that in 2018, shares traded on the private markets between $90 and $132.50. > Losses for last year were 1.2 billion Euros ($1.47 billion), which compares to 539 million Euros ($661 million) the year before. Well, there's the short of the year.
- poooogles 9y ago
  >Well, there's the short of the year. I think you're missing SNAP.
  - fortythirteen 9y ago
    ~2x is a decent short for sure, but I have to believe that SPOT is going to tank like TWIT when their claims of profitability by 2019 fall flat.
- ttul 9y ago
  May I introduce you to the Efficient Market Hypothesis (https://en.wikipedia.org/wiki/Efficient-market_hypothesis https://en.wikipedia.org/wiki/Efficient-market_hypothesis).
  - fortythirteen 9y ago
    So nobody turned a profit by correctly shorting TWIT or FIT as soon as possible or by jumping in on FB when it plummeted to <$20 a share in 2012? Seeing that trend on FB specifically, instead of jumping in on the IPO, is the difference between 4x and 8x your investment by today's valuation. Tech stocks are regularly IPO'd on pure hype, and the market will regularly turn on them when they don't understand the business model.
  - Afforess 9y ago
    I can't tell if you're serious (Poe's Law), but very few economists find EMH to be credible. Did you even read the "Criticisms" section of that wikipedia entry?
deleted 9y ago
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guelo 9y ago
I just don't see how this can be a successful company long term. If the labels see any profit they will demand more fees at the next deal negotiation. To become music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done. The easiest route is probably to become Tidal and give the company away to a few big artists in exchange for exclusives.
- harshgupta 9y ago
  Thats fair, but accessing free music is a lot easier than free tv. If they can get people to pay anything for music, thats at least better than zero for labels.
  - komali2 9y ago
    I think the music industry still isn't quite sure what to do about pirating. Seems their solution is "send spec-op soldiers to kick down doors of people in other countries" still.
- gkoberger 9y ago
  More than likely it won't come to this. Most musicians want their music everywhere, and give it away for (almost) free. Spotify/radio/etc are the marketing, and concerts/festivals/movie licensing/etc are the product. Unlike movies, there's insane repeatability of music, meaning it can be everywhere. I wouldn't be surprised, though, if less-popular tracks for artists moved to another service. You want to hear The Chainsmoker's radio singles? Play them non-stop on Spotify! But if you're a huge fan and want to hear back tracks, demos, etc, you can pay them $10/mo on a Patreon-like site. Basically, charging more for a closer relationship to studios you like, while their more popular music is released for free.
- paxy 9y ago
  The equivalent would be to start their own label and sign artists. It's hard, sure, but not impossible. They have the same advantage Netflix did - an intimate knowledge of people's musical tastes and habits. Plus they have already shown willingness to diversify into other areas - merch, concerts, original shows, videos etc.
synaesthesisx 9y ago
I do love Spotify as a product, however I don't think it will scale the same way Netflix does. Spotify is at the mercy of major record labels, and as their books become more transparent the record labels will squeeze every dollar they can for licensing. That is, unless they find a way to upend the record industry entirely. Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience. I think getting into concert tickets/streams, merchandise etc could help them potentially capture quite a bit of value in the future as well. I know the comparison is similar to original content & Netflix - but keep in mind there's an opportunity cost with media (one can only consume X amount of shows/songs within a period of time). The more attention Spotify can divert away from the major record labels the better.
- foepys 9y ago
  Netflix could be in the same position. With Disney launching their own streaming services next year, the situation could get dire for Netflix, too, if Netflix' own productions don't take off as much as they want.
  - adventured 9y ago
    It's very doubtful that Disney is or could be an serious issue for Netflix now. Netflix is approaching - or already larger than - the size of Disney's comparable entertainment business, and Netflix is growing relatively fast whereas Disney's business isn't growing much or at all. Disney's studio division does $8.3 billion in sales. Their media networks arm, which includes ABC & ESPN, does $23 billion. Netflix will hit ~$14-$15 billion in sales this year. Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. Five years from now Disney isn't likely to be much larger than they are today (just look at their growth the last few years, flat to minimum). Netflix will very likely be over $25 billion in sales at that point (which would plausibly be larger than Disney's largest business, the media networks group). At the scale Netflix has reached, every dollar of new growth that Netflix is obtaining is taking some bit of revenue away from Disney. Disney is going to mostly cannabilize themselves in switching to their own streaming service, including the mess at ESPN (the end of the hyper lucrative, subsidized cable & satellite subscribers that have been artificially fattening Disney's entertainment wallet for years). Disney is mostly in a scenario of attempting to hold their ground. The same place Walmart is in with Amazon and for the exact same reason (minimum overall market expansion, low consumer spending growth across the developed world, while the new competitor is starting to eat your existing house). Interestingly another similarity between those situations: Amazon is willing to compete at near zero profit generation in retail to pursue sales growth, which is brutal to an established giant like Walmart who has a huge investor base that expects them to generate considerable profits every year. Walmart can't just drop their profits dramatically to compete, their stock would implode. Disney is facing the same storm: Netflix operates at a level of minimal profit (~4%-5% net income margins), whereas Disney's long-established shareholders expect rich profits and a dividend (Disney typically sees 10%-20% margins in their entertainment groups, with a 16% overall net income margin). Netflix is willing to plow almost every dollar back into content production and licensing, and their shareholders cheer that on so long as the top-line growth continues.
TekMol 9y ago
Since this is just shares changing hands and not bringing money into the company - what is the impact for Spotify? Does the company itself own shares? How much money has Spotify in the bank these days?
komali2 9y ago
I'm not quite clear on why people are choosing spotify over google play music - to me the google option is superior in UI and offerings (including ad-free youtube). Am I missing something? Is it just one runs better on iPhones or is more hip (like why people choose snapchat over instagram or something)?
- bllguo 9y ago
  I use GPM, but that's because of the bundling with Youtube Red. I would prefer Spotify for a desktop app, nicer looking UI IMO, and so Google doesn't know my music prefs. But for now, ad-free YT is too nice to give up.
  - d1zzy 9y ago
    What operating system? I found Google Play Music Desktop Player to be pretty awesome (although it's just a browser underneath but it has much better integration with the rest of the system through themes, media keys) also native last.fm, lyrics, etc. https://www.googleplaymusicdesktopplayer.com/ https://www.googleplaymusicdesktopplayer.com/
- whymsicalburito 9y ago
  It's the music discovery aspect of Spotify that is their game changer. They are constantly adding new ways to find new music.
  - pm90 9y ago
    Google Play has good options for music discovery too... I stick to them mostly for their "Radio" option which is very good at selecting music similar to a song I'm listening to. That being said... I've been underwhelmed by the app's UI and performance and have given frequent feedback but haven't got any response and there has been no changes. Typical of Google... Its been so bad that I'm considering switching to Spotify soon. Its really annoying when you're trying to select some romantic music for dinner with your partner and the app keeps refusing to work.
pure_ambition 9y ago
How is Spotify raising capital from this if it's not selling shares directly? Will it wait until later to offer stock directly to the markets?
- occamrazor 9y ago
  They aren’t raising any capital. This is an opportunity for the shareholders (and maybe for employees with stock options) to cash out.
foobaw 9y ago
Their product is a lot more powerful than Soundcloud's (even though the target users might slightly differ). I really hope they have a solid roadmap and wish them the best.
- skinnymuch 9y ago
  I’m not familiar too much with SoundCloud recently. But didn’t they almost go bankrupt before having last minute money raised?
  - foobaw 9y ago
    Yeah, SoundCloud has an unsustainable ecosystem.
jpalomaki 9y ago
Can it be a problem for Spotify that it will be hard for them to increase the revenue they extract even from the most loyal customers? If streaming music becomes a commodity and price sensitive people switch to competing services what will happen? Some companies like Apple are in nice position, because they can just sell more stuff to the loyal customers. Phone, pad and watch instead of just phone. And then more expensive variants of these. Is there something Spotify could do to differentiate, something that matters even for those who don't value the sophisticated playlists? Should they go the Netflix route and start producing their own music? Or would it make sense to produce some other audio content? Think programs like "Serial" [1]. Or maybe some radio drama [2]? [1] https://serialpodcast.org/ https://serialpodcast.org/ [2] https://en.wikipedia.org/wiki/Radio_drama https://en.wikipedia.org/wiki/Radio_drama
- whatok 9y ago
  Streaming music kind of already is a commodity and the main thing that keeps users tethered to a service are playlists. I'm sure Spotify could eventually raise prices a bit but obviously only so much. I think their biggest threat would be Amazon getting their music service in order and baking the current paid version into the cost of a Prime membership.
armandososa 9y ago
I am a closeted hobbyist musician in a rather small niche (contemporary christian music in Spanish LOL)but I don't want to live off my music. I just want to be heard by somebody. And today, trough distrokid plus spotify this is sooo posible. Which wouldn't have been in my wildest of dreams 20 years ago when I wanted to start a band with my friends. Or even 10, when I toured with a small time ska band. And since my goal is being heard and not profit I would be glad to pay for listeners. And I don't think I'm the only one.
- thaumasiotes 9y ago
  > a rather small niche (contemporary christian music in Spanish LOL) I would have expected this to be a very large niche? How do the Latin American / Spanish markets treat Christian music?
  - armandososa 9y ago
    Well, at least in Mexico there is no christian radio nor a big christian music industry (no Top 20 charts or any of that). So that means touring and doing the old church pilgrimage and hoping that your style of music isn't offending to some people. The chances are bigger if you land a ministry on a big church but that's not my case.
- lavezzi 9y ago
  How do people find your music?
  - armandososa 9y ago
    They don't. Well, I have only released a single and plan to release an EP later this year and I'll figure out what to do. I'm thinking Facebook ads since I figure there's where my audience will be, but I don't really know. I wish I was more photogenic so I could do the YouTube thing but, alas, I'm not. That's where I think Spotify comes handy, because it has helped me to discover awesome artists that I wouldn't otherwise and I wish it could do the same for my music and other small artists.
- 9y ago
SirLJ 9y ago
With no underwriting Banks to support the IPO the price is steadily going down since the open...
- kolbe 9y ago
  There is no IPO price. This is not an IPO.
  - SirLJ 9y ago
    Precisely... How much down did it close at the end?
    - kolbe 9y ago
      There is no "down" because there was no IPO price to begin with. price_change = current_price - previous_price. There was no made up IPO price on Monday, so there was no made up level to defend. The only previous price we had was the last private round. And I think the close was about 60% higher than their last funding round.
      - SirLJ 9y ago
        Open for regular investors to trade at 165.90, close at 149.01 = almost 10% down for the first day... Today open at 140.00 another 6% gap down...
089723645897236 9y ago
I personally have supported them since beta (when they charged more) so I will probably pick up a share or two. They are certainly worth NFLX money. Music is insanely easy to produce, it is certain they will start courting artists directly, and if they can find an acquisition that fills the DIY punk music scene that was Soundcloud they will be just fine. They need more DIY content to go along with the curated big label stuff. And by DIY I mean letting every small Bandcamp DJ and artist on there. Might as well swallow everything right? The experience on the platform was always stellar and just keeps getting better the more data they collect. It's a good example where big data isn't creepy at all, it's amazing. They constantly filter my preferences and show me the key types of songs I like to listen to, impressive in itself but the song radio aping Pandora is also impressive and way more interactive than Pandora itself. Basically I'm mega bullish Spotify and am not even going to front like I'm not. You don't need to buy it but I doubt it goes anywhere bad. /end-activist-investor-rant
- WhompingWindows 9y ago
  You don't mention The Beatles, Led Zeppelin, and the 100's of other artists that Spotify streams millions of times. I feel DIY punk music and music that is "insanely easy to produce" is not going to make much of a dent in the massive demand for the classics/popular bands. Also, as a musician of 20 years having recorded multiple records, I don't agree good music insanely easy to make. The plethora of mediocre music out there is not good music, it takes a lot of skill and equipment to make something sound good in the studio. Sure, maybe some folks want a DIY underground sound that's not polished, but the average folks out there want a clean sound, that's what sells/drives listens. Just go on the Top 100 spotify playlist, there's basically no DIY stuff on there, its all the poppiest of the pop, heavily produced.
  - bsder 9y ago
    Do the young really care about the back catalog anymore? I'm not just being snide. Think about Elvis. When was the last time you heard something from Elvis on the radio or in your stream?
sksareen1 9y ago
I wonder how you'd value Google Play Music alone based on this type of comp. Anyone have an idea of what the number could be like w/ rationale?
- lazerpants 9y ago
  Apple Music and Google Play Music are each approximately half the size of Spotify (by subscriber). Assuming that the revenues for each service are similar (on a subscriber basis) and overhead would be similar if they were spun out, then you are just valuing them based on the number of current subscribers. Given the low friction in switching services, subscribers are around the same value for each service. My guess based on this back of the napkin math then, is that $15B for would be the comp for each of Apple Music and Google Play Music, though you would need to consider any debt held by the companies (standing for Spotify, or as part of the spin-out by the other two). That's just how I think the comp would work, I don't think any of those companies are worth those values, including Spotify.
  - seabrookmx 9y ago
    > low friction of switching services I don't agree with this. Most people build up a catalog of songs/playlists on one platform and moving to a new one and re-discovering all your music is quite a pain in the ass. This was one of the main reasons I was a late adopter of Spotify (I work in the Music Industry).. there was no easy way for me to take local libraries/playlists and create Spotify playlists from them.
mslate 9y ago
Does anyone have any idea how much Spotify is used for music vs. spoken content (e.g. podcasts/audiobooks)? Or in Soundcloud's case?
bsvalley 9y ago
Let the buzz fade away... wait for it to drop below $100 then look at your options. I don't understand why people still want to jump and buy shares the same day a private company goes public considering the hype, etc. Why would you lose that much that fast?
joshjkim 9y ago
biggest jump ball: Apple/Google/Amazon competing services. spotify deserves real credit for changing how people consume music, and I think that story will serve them well in the short-term, but their biggest risk is Apple/Google/Amazon who provide competing services that don't have any current pressure to turn a profit - Tim Cook basically said "we don't plan to make money"[1], a bad thing to hear from your primary competitor who also happens to be the most valuable company in the world. as i've said before on diff threads, I would not be surprised if Apple announces a big price decrease or other apple music news right before Spotify's first or second earnings report. still, impressive for them to make it this far, if they can really find a path to profitability that also fairly compensates artists, I wish them the best! I think it's more likely that as apple/google/amazon force them to continue to operate at a loss, downward pressure on their stock will make them a good acquisition target for one of the big tech companies looking to compete with Apple Music (Amazon seems like a real possibility here - a spotify acquisition feels similar in size and scope to their recent WF acquisition, essentially another double-down on their "everything store" vision/story). [1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds-most-innovative-company https://www.fastcompany.com/40525409/why-apple-is-the-worlds...
- xfer 9y ago
  Apple is not even close to a competitor to Spotify, they don't even have a web interface for listening to music..do you think everyone in the world is Apple product user?
- KozmoNau7 9y ago
  I for one would not switch to Apple Music. No web app, no desktop app for Linux. Google Play Music could be an option, at least they have a functional web player, but neither it nor the Android app are anywhere close to Spotify's apps.
hkmurakami 9y ago
As of writing this the market price is $150, dropping from $165. But almost surely this is a win for employees who derail the 6 month lockup uncertainty.
yonkshi 9y ago
And in Sweden, home of Spotify, the other big news is that NYSE raised Switzerland's flag. https://www.thelocal.se/20180403/spotify-swiss-or-swedish-whatevs-says-new-york-stock-exchange-flies-the-wrong-flag https://www.thelocal.se/20180403/spotify-swiss-or-swedish-wh...
- swarnie_ 9y ago
  Mistaking Switzerland for Denmark is understandable, mistaking Switzerland for Sweden is just wrong.
- jzymbaluk 9y ago
  They're basically the same country right? I mean their flags are both crosses and their names both start with Sw... /s
- quickthrower2 9y ago
  Not a mistake. It's a nod to the tax havens.
- soziawa 9y ago
  It's not even a correct Swiss flag. The Swiss flag is rectangular.
deleted 9y ago
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ebbv 9y ago
Company valued at $30 billion. Artists continue to receive almost nothing for their music being played. Something doesn't add up here.
- seabrookmx 9y ago
  > Artists continue to receive almost nothing for their music being played This is kind of FUD. There's a lot of royalties flowing out of Spotify. While it's true the payouts for many artists are smaller than they should be, 90+% of artists simply get very few plays on Streaming services and thus make no money. And Spotify isn't the only one to blame here. Most music goes through a process like this: Artist -> Label -> Distributor -> Storefront Spotify is only the storefront.. but both the Distributor (the "big three" labels UMG, Sony, and Warner do their own distribution) and the record label take a cut. There's also additional overhead for the artist, such as paying out to producers, writers (if they don't write themselves) etc.
- KozmoNau7 9y ago
  The labels are receiving huge payouts, their profits are on an upward curve now, thanks to streaming. But as always, they exploit their artists and pay them a pittance. Blame the labels.
ataturk 9y ago
These IPOs are just bagholder search parties.
fogzen 9y ago
Nothing to celebrate. My CDs from twenty years ago still work. Why would I invest time in Spotify when one day all the music just disappears, or they raise prices, etc.? If this is the future it doesn’t feel like progress.
- whalesalad 9y ago
  This reminds me of the comment on the launch thread of Dropbox.
- delecti 9y ago
  Spotify is a service, not a product. Unless you similarly eschew cellular service and grid electricity, I'm not sure what your point is.
  - z3t4 9y ago
    What to come and look at my electric collection ? Just don't touch any of the capacitors.
- cheschire 9y ago
  If all the music you want to hear is 20 years old, then you're fine. The problem is that in the near future, and in some places the present, physical media will be sold along side vinyl as one of those things that people think only hipsters use. So for any new music you may want to get, you're now forced into either purchasing a digital copy from a provider and burning copies yourself, or using a subscription service. Eventually it becomes too cumbersome to manage your music in two places, so you reduce to one, and stop using your physical discs assuming you found replicas in your subscription. But, to be honest, I've never had so much access to unknown artists' works for so cheap before. I can build whole playlists of very specific types of music and pay effectively less per month than one CD used to cost me 20 years ago for that one song I liked. So I, for one, welcome our subscription overlords.
elvirs 9y ago
im curious why spotify does not enable artist sell merchandise and tickets on its platform. as a free user I would prefer to see ads for merch and events happening near my town from my favorite artists rather than annoying ads of products and services I have 0 interest in.
stochastic_monk 9y ago
I'm afraid about what will happen as more of these streaming services compete. It seems to be mirroring the Netflix/Hulu/Disney battleground -- subscription platforms which start differentiating themselves by owning exclusive content. Spotify has started this, and Jay-Z & Co have refused to give streaming rights to their competitors, such that Spotify doesn't have access to any Jay-Z, or, oddly enough, any Metallica. The problem here is that I purchase these subscriptions so that I can have access to all of the music I haven't decided that I want to own forever yet. If this trend continues and streaming platforms become more and more exclusive, I will likely cancel my subscriptions, buy my music from the artists directly, and say goodbye to renting rather than owning music.
- pgm8705 9y ago
  Metallica's collection is definitely available on Spotify... at least in the US.
  - stochastic_monk 9y ago
    Oh, thank you! I had it backwards. Tidal doesn't have Metallica, while Spotify doesn't have Jay-Z and friends.
jdlyga 9y ago
Spotify is fantastic. Excellent usability. I can control the output of my iPhone Spotify app using the app running on my linux computer.
- KozmoNau7 9y ago
  Spotify Connect is one of their real killer features. It just works so damn well, and independent of Airplay, Chromecast, Sonos and other locked-down methods.
oUrfsWY 9y ago
I doubt the current $150/share is sustainable given the waste, fraud, abuse, and royalties. I'm forecasting a wave of layoffs before next quarter's earnings. I'll concede the product is good and the UX is nailed. There just isn't enough innovation or growth to support the need for 5000 employees. Those of you who were users of the product 5+ years ago. How much has really changed? None of the recent acquisitions have provided any valuable gain to the company's core competencies. The company culture is a shell of what it once was, with a leader of HR hellbent on neutering the minds of employees to hire unqualified -but- DIVERSE! candidates.
- KozmoNau7 9y ago
  >"waste, fraud, abuse" Please give credible examples.
- f4rker 9y ago
  >There just isn't enough innovation or growth to support the need for 5000 employees. Those of you who were users of the product 5+ years ago. How much has really changed? Almost not at all. Except now they force Social Justice Playlist on me AMPLIFY WOMEN! BLACK HISTORY! WE STAND WITH THE BANNED! Like this is what I want from my MUSIC app.
ggm 9y ago
I don't get it. They don't own the IPR so at best it's a thin revenue model on giant cashflow to agencies. All it's got is cost side risk and a thin skin of ui advantage. Maybe it's me. I have no track record identifying winners or losers.
z3t4 9y ago
today at the gym i heard some awesome songs so i asked what it was and they said "spotify radio". its impossible for me to recreate that list.
mancerayder 9y ago
Maybe they have enough capital now to adjust the Discover Weekly algorithm, which provides a weekly recipe of 30 songs that have no basis in what I listened to or have in my playlists. I do get to discover Millennial sleepily-singing voices to a disco beat and a 'laid back' riff that promises to stay in the background (thanks to a faux garagey sound). Is that what Indy means? For pre-selected music that I listen to frequently, I use playlists with Spotify. For truly discovering music with algorithms that work, I use Pandora. I do notice there is NOT a lot of overlap at times, due to bizarre licensing restrictions and deals.
- KozmoNau7 9y ago
  And I can only say that Discover Weekly and the Daily Mixes are absolutely spot-on for me.
  - therealdrag0 9y ago
    It works great for me when I'm not experimenting. But if I listen to an album of a genre I don't normally listen to my next weeks playlist gets pretty spoiled.
    - KozmoNau7 9y ago
      You can switch to a private session if you don't want to affect your recommendations, just a heads up.
      - therealdrag0 9y ago
        Woah. Thanks for pointing this out; never thought about that.
- f4rker 9y ago
  Spotify playlist are shockingly bad for a big company with so much data. "Relaxing classical" 3nd song has fast piano Well done guys.
diogenescynic 9y ago
Congrats to them, but I don’t think I’ll ever understand renting music. I can understand Netflix’s success because movie content is much less replayable and more expensive, but music is relatively cheap to own your own collection. I love music, but I don’t understand the appeal of Spotify and Pandora—I’d rather take the cost of subscription and build out my library over time.
- KozmoNau7 9y ago
  Think of it as a subscription to a larger library than you'll ever be able to amass yourself. Sure, you'll collect all of your favorite music, but what if you want to branch out a little? What if you want recommendations that are tailored for you, based on your music taste? For me, one of the main services Spotify provides is access to occasional music, stuff that I wouldn't bother to collect, but is nice to have on hand, either for parties or just curiosity. The other main service is their recommendation engine, which reliably presents me with interesting bands and albums that I didn't know about, but fit very well with my tastes. I consider $10/month a bargain for those services. (I still keep an offline collection of my absolute very favorite albums, of course)
udfalkso 9y ago
Maybe they'll make an Apple TV app now? Does anyone know why that doesn't exist yet?
rs86 9y ago
Google can kill them at any moment with Play.
- KozmoNau7 9y ago
  Really? How?
abalone 9y ago
Not enough people talking about this: The fundamental challenge for Spotify is they have to make money while Apple Music doesn't. Apple Music can run break-even as a platform feature, like the App Store was (at least in the early days). Or they could pay artists more with that margin and get more exclusives. Either way, it's a fundamental long term competitive disadvantage for Spotify.
- vlunkr 9y ago
  I know it’s just an acecdote, but I don’t know a single person that uses Apple Music. Spotify already has a huge library and mindshare. It was too little too late for Apple IMO
  - abalone 9y ago
    Which is why you should never draw conclusions from anecdotes.[1] [1] Apple Music is set to surpass Spotify in paid US subscribers this summer https://www.theverge.com/2018/2/4/16971436/apple-music-surpass-spotify-us-subscribers https://www.theverge.com/2018/2/4/16971436/apple-music-surpa...
    - pertsix 9y ago
      Most of these users are converting from their shrinking iTunes business.
      - abalone 9y ago
        So what’s your point? Apple Music is still overtaking Spotify this year. And just like iTunes, they don’t need to make much money on it.
        KozmoNau7 9y ago
        Only in the US, Spotify is huge in Europe and other parts of the world, where Apple Music is basically unknown.
f4rker 9y ago
$30B value company needs to get their shit together. So many major albums have the wrong release date.
LeicaLatte 9y ago
Congrats Spotify!
rdl 9y ago
I'm glad the DPO model was successful -- would be great if it, or something like it, became the default.
rado 9y ago
Not enough for a native desktop app?
ConcernedCoder 9y ago
If the original investors want to sell their shares, I'm not sure it's a good sign?
- nielsole 9y ago
  VCs usually aim for very high ROI. Even if your investment still increases in value more than market rate interest rates, for a VC it might be more valuable to sell them to preserve its own metrics (each year you keep the shares, your average ROI decreases).
allenleein 9y ago
1/ Spotify is not Netflix. There won’t be a Netfix for music. 2/ Netflix, with almost 118 million subscribers worldwide, has allayed concerns about its slowing growth by reminding analysts there are more than 700 million broadband households. Spotify, with 71 million paying users, touts an even larger number in its filing: 1.6 billion payment-enabled smartphone owners expected by 2021. #Growth 3/ Spotify delivers more than 70 percent of its sales to music rights holders, despite efforts to improve profit margins. 4/ Universal Music Group, Sony Music Entertainment, Warner Music Group, Merlin (the representative for many independent labels), which own 87% of the music on Spotify as measured by streams. 5/ It seems highly unlikely Spotify’s Cost of Revenue will improve much in the short-term: those record deals are locked in until at least next year. 6/ It means once the growth of Spotify starts to slow even a bit, it will has very serious trouble. 7/ Netflix is building its own studio to produce shows on its own. Spotify says it has no interest in signing artists, or paying for artists to record. (They don’t have the capital) 8/ However, it has another plan to reduce its reliance on its main suppliers: by making them less relevant. “The old model favoured certain gatekeepers. Artists had to be signed to a label,” chief executive Daniel Ek wrote in a letter included in the filing. “They needed access to a recording studio, and they had to be played on terrestrial radio to achieve success. Today, artists can produce and release their own music. Labels, studios, and radio still matter, but in a cluttered landscape, artists’ biggest challenge is navigating this complexity to get heard. We believe Spotify empowers them to break through.” (Ref 4/: Those labels own 85% of the music on Spotify as measured by streams. Progress of empowering: 15%.) 9/ This goal sounds like “the Podcast model” started in 2005, unfortunately, by their biggest competitor: Apple. Spotify's Dilemma: https://allenleein.github.io/brains/2018/03/spotifys-dilemma https://allenleein.github.io/brains/2018/03/spotifys-dilemma
deleted 9y ago
[deleted]

692 points by harshgupta 9y ago

Contrasting this offering, where there were no underwriters and things proceeded spectacularly, with the Dropbox IPO, where the underwriters added negative value, speaks profoundly to the future role of private markets in the capital markets for technology companies. Disclaimer: I bet my career on private markets supplanting public ones, in respect of certain technology companies, many years ago.

fullshark 9y ago
I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?
- jedberg 9y ago
  My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra. In theory the service they provide is valuation, but in this day and age of instant information, that really isn't necessary anymore. Back in the day when it took a few days for a person to execute a trade, maybe they provided valuable insight, but now, with stock trades for retail investors taking seconds from "I want that" to "I have that", they don't really have better information anymore.
  - chimeracoder 9y ago
    > My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra. That's typically not true. The underwriter isn't guaranteed the difference. They're basically an insurer: the company is able to know (before the IPO) exactly how much money they can expect to make on it. In exchange for this certainty, the forego the potential upside (the chance that the opening price will be much higher, in which case the company is leaving money on the table). In this case, Spotify isn't even raising any money (because this is a direct listing, not an IPO), so there's no point for underwriters, because... well, there's no uncertainty about how much money they'll be raising, since they're not raising any.
    - jedberg 9y ago
      That's what I thought too, but someone from the investment banking industry corrected me the last time I said that, and pointed out that "banks never lose money", and that the company does eventually have to repay them.
      - chimeracoder 9y ago
        Underwriters aren't gatekeepers by definition, because there's nothing preventing companies from foregoing underwriters. But almost every single company that goes public chooses to[0], because they gain significant value from the process. There are a few exceptions - Google is the most famous one. But they're rare, and even Google ran into trouble with theirs - they literally had to cut the size of the amount they raised in half about a week before the IPO, because the demand was lower than they thought, and then ended up leaving a lot money on the table. We forget about all of that today because Google is now a successful public company. But their IPO was unambiguously a disaster from the company's perspective - they would have raised much more money with a conventional process. > That's what I thought too, but someone from the investment banking industry corrected me the last time I said that, and pointed out that "banks never lose money", and that the company does eventually have to repay them. No, that's not true. If the IPO is undersubscribed, the company isn't liable for making the bank whole. If that were true, then yes, there would be literally no reason for a company to use an underwriter, because there's no requirement to.
        jedberg 9y ago
        > because there's nothing preventing companies from foregoing underwriters. Isn't that like saying "there is nothing that prevents you from using highways"? Like sure, you don't have to use an underwriter, but, as you pointed out with the Google example, it won't go well for you if you leave them out.
        chimeracoder 9y ago
        > Like sure, you don't have to use an underwriter, but, as you pointed out with the Google example, it won't go well for you if you leave them out. Well, the original claim was that underwriters provide negative value. There's a tradeoff, but clearly they do provide positive value, on net.
  - JumpCrisscross 9y ago
    > If your stock underperforms, you have to pay them back You're referring to the greenshoe [1]. Suppose a company is selling 100 shares at $100 per share. The underwriter will collect orders for 115 shares at $100 per share. This puts them in a natural short position. A greenshoe lets the underwriter buy up to 15 additional shares from the company at $100 per share. If the price goes up to $105, they exercise the greenshoe. They buy 15 shares from the company at $100 and deliver them to the buyers to whom they sold shares they didn't have. If the price goes down to $95, they buy those shares (leaving the greenshoe un-exercised) and deliver them to the buyers to whom they sold the shares at $100. [1] https://en.wikipedia.org/wiki/Greenshoe https://en.wikipedia.org/wiki/Greenshoe
- chimeracoder 9y ago
  > I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management? Yes, and furthermore, the Spotify listing is anomaly in a lot of ways due to the idiosyncratic terms under which they raised money previously, and the fact that the major labels (who are their primary vendors) had ownership stakes in them from the very beginning. In IPOs, companies raise money, and underwriters serve as insurers to guarantee the amount that the company will raise. But Spotify isn't even raising any money today! They're just providing liquidity for existing shareholders. That's dramatically different from IPOs, so of course the underwriters are superfluous for this particular case. I don't think it makes sense to generalize anything from Spotify, but certainly not the role of underwriters.
- eganist 9y ago
  Well, that and aid with the capital raise. In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions. Edit: yep. > The digital music company isn’t selling its shares on the stock market, meaning the company isn’t raising any money today. Instead, the event known as a “direct listing,” is a collection of transactions from existing shareholders (like employees and investors) selling shares directly to stock market investors. It took a while for the market makers to sort this out.
  - chimeracoder 9y ago
    > In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions. Yup, Spotify was under contractual requirements to go public, due to the terms of their last fundraising round (or else they had to pay incredibly stiff penalties). Underwriters serve a role for most IPOs, but Spotify is different because their listing wasn't about raising money - it was about fulfilling their contractual requirements to provide liquidity on public markets so that they could avoid the penalties they would otherwise face.
    - JumpCrisscross 9y ago
      > Spotify was under contractual requirements to go public, due to the terms of their last fundraising round Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language.
      - chimeracoder 9y ago
        > Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language. To be specific: they did a DLP, not an IPO. Underwriters make sense for IPOs, because the company is raising money. There's no point to an underwriter in an DLP, because the company isn't raising money. They were not under requirements to hold an IPO; they were required to provide public liquidity to their shareholders. That's why they chose a process that involved no underwriting. And that's also why their case doesn't really provide any generalize lessons, because those types of terms are incredibly rare in growth-stage venture financing.
- JumpCrisscross 9y ago
  > Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management? IPOs have (a) companies issuing stock, (b) private investors selling stock and (c) public investors pricing an asset never before continuously priced. All this happens simultaneously. If the ball drops on one, it drops on them all. Underwriting is a good way to manage that risk. Private markets challenge that simultaneity. Instead of selling into the IPO, companies can sell some in the private markets and some after going public. Instead of having every insider sell on opening day, they can sell in private secondaries and then after the lock-up. That leaves element (c) isolated. That's difficult--Spotify still hired bankers--but it doesn't need underwriting. Another way to look at it: three services were bundled into the traditional IPO. Bankers charged richly for the bundle. Private markets give companies the option, to dis-assemble the bundle and price and time them separately.
jartelt 9y ago
Spotify paid bankers roughly 40 million euros to run this direct listing and did not raise any additional funding in the process (because it's not really an offering). Dropbox paid bankers about the same amount in fees and was able to raise a bunch of capital in the process. I wouldn't necessarily call one of these events spectacular and the other not spectacular. They are just different...
- JumpCrisscross 9y ago
  > Spotify paid bankers roughly 40 million euros to run this direct listing and did not raise any additional funding in the process (because it's not really an offering). Dropbox paid bankers about the same amount in fees and was able to raise a bunch of capital in the process Agreed--the comparison is enough to spring a reasonable hypothesis, nothing more. That said, Spotify is a large foreign lister; Dropbox is a small domestic seller. I'm not advocating the death of underwriters. They're a necessary part of the ecosystem. What we're seeing here is a broadening of the options available to the ecosystem. That's new, and that's good.

jiggunjer 9y ago

How much are the investment bankers earning on this?

jedberg 9y ago
Edit: Apparently I was wrong, they still paid a bunch of bankers for advice, but technically they aren't making anything by skimming off the top like most IPOs. I think nothing. It's a direct sale, so the insiders (including the employees, not just the execs) get to sell however many shares they want directly to public shareholders. So the company doesn't make any money either, just the shareholders. I suppose at some point the company itself could sell shares, and then maybe a banker would get involved, but since it would already be publicly listed, I'm not sure they'd have to be.
- jonknee 9y ago
  They're actually making more from Spotify's direct listing than they did for Dropbox's full on IPO... So much for disrupting the business model! https://www.bloomberg.com/news/articles/2018-03-26/spotify-listing-disrupts-the-ipo-but-keeps-the-costs https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...
- ProAm 9y ago
  Interesting, is this just to let shareholders cash out? Im surprised they would do this without making any (or at least a little) money on it given the track record. Seems risky when they are still beholden to the lables for the most part.
nfriedly 9y ago
I think it was somewhere around $30 million spent on bankers for the non-IPO. (Which I guess is less then what they would have spent on an actual IPO? Although in that case, the cash raised from the IPO would have paid for the banker expenses.) Edit: this is where I got the $30 million figure from: https://www.bloomberg.com/view/articles/2018-01-16/spotify-will-pay-banks-to-cut-out-the-banks https://www.bloomberg.com/view/articles/2018-01-16/spotify-w...
9y ago

verelo 9y ago

So i bought in, who knows where this will go though :) One of my hopes it that just like NFLX, once the company focuses on producing / licensing it's own content they can do really well. I'm interested in hearing what others have to say on this! Did you buy, will you buy? Why?

browie 9y ago
I don't know much about buying shares but I would like to buy in and invest. Care to give me feedback on that? Where did you buy in?
- praneshp 9y ago
  I don't know too much about buying shares, but anyone that knows less than even me should not be buying individual stocks (that too based on IPO day hype). https://www.bogleheads.org/wiki/Getting_started https://www.bogleheads.org/wiki/Getting_started
  - KozmoNau7 9y ago
    Absolutely. Buy index funds, don't worry so much about fluctuations, keep a long-term perspective.
    - verelo 9y ago
      I agree with the above two remarks. In my situation the money i “experiment” with at an individual stock level is not relevant to my end of work plan. I assume the spend is as healthy as buying a sports car, and while I’d love to be wrong, I’d encourage you to buy index funds and treat individual stock picks in the same manner.
- verelo 9y ago
  Yeah i have no good advice other than to buy into the indexes. If you’re picking stocks it better be for fun, in my case that’s what it is.
9y ago

froindt 9y ago

Maybe my perception is off, but it seems like we're getting lots of tech IPO's in a relatively short time. Stitch Fix, Dropbox, Blue Apron, Snap, and Roku to name a few. For a long time we weren't seeing too many big tech IPO's. Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?

overcast 9y ago
Remember what the stock market charts looked like last time? Stockpile some cash, invest when it falls out.
- deleted 9y ago
  [deleted]
albertgoeswoof 9y ago
Are blue apron and stitch fix tech companies? I thought they were just sending out boxes of stuff to subscribers, with a website/app for taking orders?
- meritt 9y ago
  Is Spotify a tech company? I thought they were just sending an audio stream to subscribers with a website/app for searching?
  - harshgupta 9y ago
    Spotify is a tech company by all measures. Their core value propositions - recommendation engine, UI/UX, scaling responsive applications - those are pretty 'tech' problems.
    - deleted 9y ago
      [deleted]
    - 9y ago

PaulHoule 9y ago

This has investment bankers quaking in their boots.

wweidendorf 9y ago
Not even remotely - they made out better on this than other recent IPOs. They are paying 35 - 40 euros or ~$45 million at the midpoint. If they float $1 billion in shares today, that means fees are 4.5% of the overall “offering”, or almost exactly what Dropbox paid. https://www.bloomberg.com/news/articles/2018-03-26/spotify-listing-disrupts-the-ipo-but-keeps-the-costs https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...
timkpaine 9y ago
1. Snapchat was listing, not raising capital. Until we see a similarly high-profile company try to raise equity (and I doubt we will), there's no reason to worry for IB. 2. If a client wants to buy/sell snapchat, the investment bank is still going to make broker fees on the transactions.

swypych 9y ago

Spotify Revenue (Euros) 2017 4.09 billion 2016 2.95 billion 2015 1.94 billion Net Loss (Euros) 2017 1.2 billion 2016 539 million Impressive revenue growth, but I can't understand the valuation given the losses. I love their product though.

zer00eyz 9y ago
The value, well it is "investor demand" The going public part -- well that was foretold with their last round of financing (it was a condition) and this was a strange way to do it. You may love the product but will it last is the question. If I were going to bet I would say that 5 years down the road someone buys it for pennies on the dollar or it goes bankrupt due to toxic debt. I wonder what the short position is on it.
- TAForObvReasons 9y ago
  > this was a strange way to do it. This was done partially because the company itself isn't raising money. If the company executives believed they would need a large cash cushion, they would have tried to raise some cash in the deal, so they must believe they can reverse course before the cash crunch
  - zer00eyz 9y ago
    It wasn't about raising money - they had their hand forced by the last round of debt/equity deal that they did: https://www.recode.net/2018/1/3/16847786/spotify-tpg-tencent-debt-dragoneer-ipo-music-streaming https://www.recode.net/2018/1/3/16847786/spotify-tpg-tencent... Not that it is a great article but honestly that looks like a very messy transaction. It also looks like Spotify got the raw end of that deal. The whole thing is just crazy and I'm not sure how anyone can make sense of those numbers.
- ikeaman 9y ago
  I know they didn't go through a traditional IPO model, but from what I understand there's always a certain amount of days imposed by the SEC to restrict short selling on novel securities.

fortythirteen 9y ago

> The company says that in 2018, shares traded on the private markets between $90 and $132.50. > Losses for last year were 1.2 billion Euros ($1.47 billion), which compares to 539 million Euros ($661 million) the year before. Well, there's the short of the year.

poooogles 9y ago
>Well, there's the short of the year. I think you're missing SNAP.
- fortythirteen 9y ago
  ~2x is a decent short for sure, but I have to believe that SPOT is going to tank like TWIT when their claims of profitability by 2019 fall flat.
ttul 9y ago
May I introduce you to the Efficient Market Hypothesis (https://en.wikipedia.org/wiki/Efficient-market_hypothesis https://en.wikipedia.org/wiki/Efficient-market_hypothesis).
- fortythirteen 9y ago
  So nobody turned a profit by correctly shorting TWIT or FIT as soon as possible or by jumping in on FB when it plummeted to <$20 a share in 2012? Seeing that trend on FB specifically, instead of jumping in on the IPO, is the difference between 4x and 8x your investment by today's valuation. Tech stocks are regularly IPO'd on pure hype, and the market will regularly turn on them when they don't understand the business model.
- Afforess 9y ago
  I can't tell if you're serious (Poe's Law), but very few economists find EMH to be credible. Did you even read the "Criticisms" section of that wikipedia entry?

deleted 9y ago

[deleted]

guelo 9y ago

I just don't see how this can be a successful company long term. If the labels see any profit they will demand more fees at the next deal negotiation. To become music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done. The easiest route is probably to become Tidal and give the company away to a few big artists in exchange for exclusives.

harshgupta 9y ago
Thats fair, but accessing free music is a lot easier than free tv. If they can get people to pay anything for music, thats at least better than zero for labels.
- komali2 9y ago
  I think the music industry still isn't quite sure what to do about pirating. Seems their solution is "send spec-op soldiers to kick down doors of people in other countries" still.
gkoberger 9y ago
More than likely it won't come to this. Most musicians want their music everywhere, and give it away for (almost) free. Spotify/radio/etc are the marketing, and concerts/festivals/movie licensing/etc are the product. Unlike movies, there's insane repeatability of music, meaning it can be everywhere. I wouldn't be surprised, though, if less-popular tracks for artists moved to another service. You want to hear The Chainsmoker's radio singles? Play them non-stop on Spotify! But if you're a huge fan and want to hear back tracks, demos, etc, you can pay them $10/mo on a Patreon-like site. Basically, charging more for a closer relationship to studios you like, while their more popular music is released for free.
paxy 9y ago
The equivalent would be to start their own label and sign artists. It's hard, sure, but not impossible. They have the same advantage Netflix did - an intimate knowledge of people's musical tastes and habits. Plus they have already shown willingness to diversify into other areas - merch, concerts, original shows, videos etc.

synaesthesisx 9y ago

I do love Spotify as a product, however I don't think it will scale the same way Netflix does. Spotify is at the mercy of major record labels, and as their books become more transparent the record labels will squeeze every dollar they can for licensing. That is, unless they find a way to upend the record industry entirely. Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience. I think getting into concert tickets/streams, merchandise etc could help them potentially capture quite a bit of value in the future as well. I know the comparison is similar to original content & Netflix - but keep in mind there's an opportunity cost with media (one can only consume X amount of shows/songs within a period of time). The more attention Spotify can divert away from the major record labels the better.

foepys 9y ago
Netflix could be in the same position. With Disney launching their own streaming services next year, the situation could get dire for Netflix, too, if Netflix' own productions don't take off as much as they want.
- adventured 9y ago
  It's very doubtful that Disney is or could be an serious issue for Netflix now. Netflix is approaching - or already larger than - the size of Disney's comparable entertainment business, and Netflix is growing relatively fast whereas Disney's business isn't growing much or at all. Disney's studio division does $8.3 billion in sales. Their media networks arm, which includes ABC & ESPN, does $23 billion. Netflix will hit ~$14-$15 billion in sales this year. Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. Five years from now Disney isn't likely to be much larger than they are today (just look at their growth the last few years, flat to minimum). Netflix will very likely be over $25 billion in sales at that point (which would plausibly be larger than Disney's largest business, the media networks group). At the scale Netflix has reached, every dollar of new growth that Netflix is obtaining is taking some bit of revenue away from Disney. Disney is going to mostly cannabilize themselves in switching to their own streaming service, including the mess at ESPN (the end of the hyper lucrative, subsidized cable & satellite subscribers that have been artificially fattening Disney's entertainment wallet for years). Disney is mostly in a scenario of attempting to hold their ground. The same place Walmart is in with Amazon and for the exact same reason (minimum overall market expansion, low consumer spending growth across the developed world, while the new competitor is starting to eat your existing house). Interestingly another similarity between those situations: Amazon is willing to compete at near zero profit generation in retail to pursue sales growth, which is brutal to an established giant like Walmart who has a huge investor base that expects them to generate considerable profits every year. Walmart can't just drop their profits dramatically to compete, their stock would implode. Disney is facing the same storm: Netflix operates at a level of minimal profit (~4%-5% net income margins), whereas Disney's long-established shareholders expect rich profits and a dividend (Disney typically sees 10%-20% margins in their entertainment groups, with a 16% overall net income margin). Netflix is willing to plow almost every dollar back into content production and licensing, and their shareholders cheer that on so long as the top-line growth continues.

TekMol 9y ago

Since this is just shares changing hands and not bringing money into the company - what is the impact for Spotify? Does the company itself own shares? How much money has Spotify in the bank these days?

komali2 9y ago

I'm not quite clear on why people are choosing spotify over google play music - to me the google option is superior in UI and offerings (including ad-free youtube). Am I missing something? Is it just one runs better on iPhones or is more hip (like why people choose snapchat over instagram or something)?

bllguo 9y ago
I use GPM, but that's because of the bundling with Youtube Red. I would prefer Spotify for a desktop app, nicer looking UI IMO, and so Google doesn't know my music prefs. But for now, ad-free YT is too nice to give up.
- d1zzy 9y ago
  What operating system? I found Google Play Music Desktop Player to be pretty awesome (although it's just a browser underneath but it has much better integration with the rest of the system through themes, media keys) also native last.fm, lyrics, etc. https://www.googleplaymusicdesktopplayer.com/ https://www.googleplaymusicdesktopplayer.com/
whymsicalburito 9y ago
It's the music discovery aspect of Spotify that is their game changer. They are constantly adding new ways to find new music.
- pm90 9y ago
  Google Play has good options for music discovery too... I stick to them mostly for their "Radio" option which is very good at selecting music similar to a song I'm listening to. That being said... I've been underwhelmed by the app's UI and performance and have given frequent feedback but haven't got any response and there has been no changes. Typical of Google... Its been so bad that I'm considering switching to Spotify soon. Its really annoying when you're trying to select some romantic music for dinner with your partner and the app keeps refusing to work.

pure_ambition 9y ago

How is Spotify raising capital from this if it's not selling shares directly? Will it wait until later to offer stock directly to the markets?

occamrazor 9y ago
They aren’t raising any capital. This is an opportunity for the shareholders (and maybe for employees with stock options) to cash out.

foobaw 9y ago

Their product is a lot more powerful than Soundcloud's (even though the target users might slightly differ). I really hope they have a solid roadmap and wish them the best.

skinnymuch 9y ago
I’m not familiar too much with SoundCloud recently. But didn’t they almost go bankrupt before having last minute money raised?
- foobaw 9y ago
  Yeah, SoundCloud has an unsustainable ecosystem.

jpalomaki 9y ago

Can it be a problem for Spotify that it will be hard for them to increase the revenue they extract even from the most loyal customers? If streaming music becomes a commodity and price sensitive people switch to competing services what will happen? Some companies like Apple are in nice position, because they can just sell more stuff to the loyal customers. Phone, pad and watch instead of just phone. And then more expensive variants of these. Is there something Spotify could do to differentiate, something that matters even for those who don't value the sophisticated playlists? Should they go the Netflix route and start producing their own music? Or would it make sense to produce some other audio content? Think programs like "Serial" [1]. Or maybe some radio drama [2]? [1] https://serialpodcast.org/ https://serialpodcast.org/ [2] https://en.wikipedia.org/wiki/Radio_drama https://en.wikipedia.org/wiki/Radio_drama

whatok 9y ago
Streaming music kind of already is a commodity and the main thing that keeps users tethered to a service are playlists. I'm sure Spotify could eventually raise prices a bit but obviously only so much. I think their biggest threat would be Amazon getting their music service in order and baking the current paid version into the cost of a Prime membership.

armandososa 9y ago

I am a closeted hobbyist musician in a rather small niche (contemporary christian music in Spanish LOL)but I don't want to live off my music. I just want to be heard by somebody. And today, trough distrokid plus spotify this is sooo posible. Which wouldn't have been in my wildest of dreams 20 years ago when I wanted to start a band with my friends. Or even 10, when I toured with a small time ska band. And since my goal is being heard and not profit I would be glad to pay for listeners. And I don't think I'm the only one.

thaumasiotes 9y ago
> a rather small niche (contemporary christian music in Spanish LOL) I would have expected this to be a very large niche? How do the Latin American / Spanish markets treat Christian music?
- armandososa 9y ago
  Well, at least in Mexico there is no christian radio nor a big christian music industry (no Top 20 charts or any of that). So that means touring and doing the old church pilgrimage and hoping that your style of music isn't offending to some people. The chances are bigger if you land a ministry on a big church but that's not my case.
lavezzi 9y ago
How do people find your music?
- armandososa 9y ago
  They don't. Well, I have only released a single and plan to release an EP later this year and I'll figure out what to do. I'm thinking Facebook ads since I figure there's where my audience will be, but I don't really know. I wish I was more photogenic so I could do the YouTube thing but, alas, I'm not. That's where I think Spotify comes handy, because it has helped me to discover awesome artists that I wouldn't otherwise and I wish it could do the same for my music and other small artists.
9y ago

SirLJ 9y ago

With no underwriting Banks to support the IPO the price is steadily going down since the open...

kolbe 9y ago
There is no IPO price. This is not an IPO.
- SirLJ 9y ago
  Precisely... How much down did it close at the end?
  - kolbe 9y ago
    There is no "down" because there was no IPO price to begin with. price_change = current_price - previous_price. There was no made up IPO price on Monday, so there was no made up level to defend. The only previous price we had was the last private round. And I think the close was about 60% higher than their last funding round.
    - SirLJ 9y ago
      Open for regular investors to trade at 165.90, close at 149.01 = almost 10% down for the first day... Today open at 140.00 another 6% gap down...

089723645897236 9y ago

I personally have supported them since beta (when they charged more) so I will probably pick up a share or two. They are certainly worth NFLX money. Music is insanely easy to produce, it is certain they will start courting artists directly, and if they can find an acquisition that fills the DIY punk music scene that was Soundcloud they will be just fine. They need more DIY content to go along with the curated big label stuff. And by DIY I mean letting every small Bandcamp DJ and artist on there. Might as well swallow everything right? The experience on the platform was always stellar and just keeps getting better the more data they collect. It's a good example where big data isn't creepy at all, it's amazing. They constantly filter my preferences and show me the key types of songs I like to listen to, impressive in itself but the song radio aping Pandora is also impressive and way more interactive than Pandora itself. Basically I'm mega bullish Spotify and am not even going to front like I'm not. You don't need to buy it but I doubt it goes anywhere bad. /end-activist-investor-rant

WhompingWindows 9y ago
You don't mention The Beatles, Led Zeppelin, and the 100's of other artists that Spotify streams millions of times. I feel DIY punk music and music that is "insanely easy to produce" is not going to make much of a dent in the massive demand for the classics/popular bands. Also, as a musician of 20 years having recorded multiple records, I don't agree good music insanely easy to make. The plethora of mediocre music out there is not good music, it takes a lot of skill and equipment to make something sound good in the studio. Sure, maybe some folks want a DIY underground sound that's not polished, but the average folks out there want a clean sound, that's what sells/drives listens. Just go on the Top 100 spotify playlist, there's basically no DIY stuff on there, its all the poppiest of the pop, heavily produced.
- bsder 9y ago
  Do the young really care about the back catalog anymore? I'm not just being snide. Think about Elvis. When was the last time you heard something from Elvis on the radio or in your stream?

sksareen1 9y ago

I wonder how you'd value Google Play Music alone based on this type of comp. Anyone have an idea of what the number could be like w/ rationale?

lazerpants 9y ago
Apple Music and Google Play Music are each approximately half the size of Spotify (by subscriber). Assuming that the revenues for each service are similar (on a subscriber basis) and overhead would be similar if they were spun out, then you are just valuing them based on the number of current subscribers. Given the low friction in switching services, subscribers are around the same value for each service. My guess based on this back of the napkin math then, is that $15B for would be the comp for each of Apple Music and Google Play Music, though you would need to consider any debt held by the companies (standing for Spotify, or as part of the spin-out by the other two). That's just how I think the comp would work, I don't think any of those companies are worth those values, including Spotify.
- seabrookmx 9y ago
  > low friction of switching services I don't agree with this. Most people build up a catalog of songs/playlists on one platform and moving to a new one and re-discovering all your music is quite a pain in the ass. This was one of the main reasons I was a late adopter of Spotify (I work in the Music Industry).. there was no easy way for me to take local libraries/playlists and create Spotify playlists from them.

mslate 9y ago

Does anyone have any idea how much Spotify is used for music vs. spoken content (e.g. podcasts/audiobooks)? Or in Soundcloud's case?

bsvalley 9y ago

Let the buzz fade away... wait for it to drop below $100 then look at your options. I don't understand why people still want to jump and buy shares the same day a private company goes public considering the hype, etc. Why would you lose that much that fast?

joshjkim 9y ago

biggest jump ball: Apple/Google/Amazon competing services. spotify deserves real credit for changing how people consume music, and I think that story will serve them well in the short-term, but their biggest risk is Apple/Google/Amazon who provide competing services that don't have any current pressure to turn a profit - Tim Cook basically said "we don't plan to make money"[1], a bad thing to hear from your primary competitor who also happens to be the most valuable company in the world. as i've said before on diff threads, I would not be surprised if Apple announces a big price decrease or other apple music news right before Spotify's first or second earnings report. still, impressive for them to make it this far, if they can really find a path to profitability that also fairly compensates artists, I wish them the best! I think it's more likely that as apple/google/amazon force them to continue to operate at a loss, downward pressure on their stock will make them a good acquisition target for one of the big tech companies looking to compete with Apple Music (Amazon seems like a real possibility here - a spotify acquisition feels similar in size and scope to their recent WF acquisition, essentially another double-down on their "everything store" vision/story). [1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds-most-innovative-company https://www.fastcompany.com/40525409/why-apple-is-the-worlds...

xfer 9y ago
Apple is not even close to a competitor to Spotify, they don't even have a web interface for listening to music..do you think everyone in the world is Apple product user?
KozmoNau7 9y ago
I for one would not switch to Apple Music. No web app, no desktop app for Linux. Google Play Music could be an option, at least they have a functional web player, but neither it nor the Android app are anywhere close to Spotify's apps.

hkmurakami 9y ago

As of writing this the market price is $150, dropping from $165. But almost surely this is a win for employees who derail the 6 month lockup uncertainty.

yonkshi 9y ago

And in Sweden, home of Spotify, the other big news is that NYSE raised Switzerland's flag. https://www.thelocal.se/20180403/spotify-swiss-or-swedish-whatevs-says-new-york-stock-exchange-flies-the-wrong-flag https://www.thelocal.se/20180403/spotify-swiss-or-swedish-wh...

swarnie_ 9y ago
Mistaking Switzerland for Denmark is understandable, mistaking Switzerland for Sweden is just wrong.
jzymbaluk 9y ago
They're basically the same country right? I mean their flags are both crosses and their names both start with Sw... /s
quickthrower2 9y ago
Not a mistake. It's a nod to the tax havens.
soziawa 9y ago
It's not even a correct Swiss flag. The Swiss flag is rectangular.

deleted 9y ago

[deleted]

ebbv 9y ago

Company valued at $30 billion. Artists continue to receive almost nothing for their music being played. Something doesn't add up here.

seabrookmx 9y ago
> Artists continue to receive almost nothing for their music being played This is kind of FUD. There's a lot of royalties flowing out of Spotify. While it's true the payouts for many artists are smaller than they should be, 90+% of artists simply get very few plays on Streaming services and thus make no money. And Spotify isn't the only one to blame here. Most music goes through a process like this: Artist -> Label -> Distributor -> Storefront Spotify is only the storefront.. but both the Distributor (the "big three" labels UMG, Sony, and Warner do their own distribution) and the record label take a cut. There's also additional overhead for the artist, such as paying out to producers, writers (if they don't write themselves) etc.
KozmoNau7 9y ago
The labels are receiving huge payouts, their profits are on an upward curve now, thanks to streaming. But as always, they exploit their artists and pay them a pittance. Blame the labels.

ataturk 9y ago

These IPOs are just bagholder search parties.

fogzen 9y ago

Nothing to celebrate. My CDs from twenty years ago still work. Why would I invest time in Spotify when one day all the music just disappears, or they raise prices, etc.? If this is the future it doesn’t feel like progress.

whalesalad 9y ago
This reminds me of the comment on the launch thread of Dropbox.
delecti 9y ago
Spotify is a service, not a product. Unless you similarly eschew cellular service and grid electricity, I'm not sure what your point is.
- z3t4 9y ago
  What to come and look at my electric collection ? Just don't touch any of the capacitors.
cheschire 9y ago
If all the music you want to hear is 20 years old, then you're fine. The problem is that in the near future, and in some places the present, physical media will be sold along side vinyl as one of those things that people think only hipsters use. So for any new music you may want to get, you're now forced into either purchasing a digital copy from a provider and burning copies yourself, or using a subscription service. Eventually it becomes too cumbersome to manage your music in two places, so you reduce to one, and stop using your physical discs assuming you found replicas in your subscription. But, to be honest, I've never had so much access to unknown artists' works for so cheap before. I can build whole playlists of very specific types of music and pay effectively less per month than one CD used to cost me 20 years ago for that one song I liked. So I, for one, welcome our subscription overlords.

elvirs 9y ago

im curious why spotify does not enable artist sell merchandise and tickets on its platform. as a free user I would prefer to see ads for merch and events happening near my town from my favorite artists rather than annoying ads of products and services I have 0 interest in.

stochastic_monk 9y ago

I'm afraid about what will happen as more of these streaming services compete. It seems to be mirroring the Netflix/Hulu/Disney battleground -- subscription platforms which start differentiating themselves by owning exclusive content. Spotify has started this, and Jay-Z & Co have refused to give streaming rights to their competitors, such that Spotify doesn't have access to any Jay-Z, or, oddly enough, any Metallica. The problem here is that I purchase these subscriptions so that I can have access to all of the music I haven't decided that I want to own forever yet. If this trend continues and streaming platforms become more and more exclusive, I will likely cancel my subscriptions, buy my music from the artists directly, and say goodbye to renting rather than owning music.

pgm8705 9y ago
Metallica's collection is definitely available on Spotify... at least in the US.
- stochastic_monk 9y ago
  Oh, thank you! I had it backwards. Tidal doesn't have Metallica, while Spotify doesn't have Jay-Z and friends.

jdlyga 9y ago

Spotify is fantastic. Excellent usability. I can control the output of my iPhone Spotify app using the app running on my linux computer.

KozmoNau7 9y ago
Spotify Connect is one of their real killer features. It just works so damn well, and independent of Airplay, Chromecast, Sonos and other locked-down methods.

oUrfsWY 9y ago

I doubt the current $150/share is sustainable given the waste, fraud, abuse, and royalties. I'm forecasting a wave of layoffs before next quarter's earnings. I'll concede the product is good and the UX is nailed. There just isn't enough innovation or growth to support the need for 5000 employees. Those of you who were users of the product 5+ years ago. How much has really changed? None of the recent acquisitions have provided any valuable gain to the company's core competencies. The company culture is a shell of what it once was, with a leader of HR hellbent on neutering the minds of employees to hire unqualified -but- DIVERSE! candidates.

KozmoNau7 9y ago
>"waste, fraud, abuse" Please give credible examples.
f4rker 9y ago
>There just isn't enough innovation or growth to support the need for 5000 employees. Those of you who were users of the product 5+ years ago. How much has really changed? Almost not at all. Except now they force Social Justice Playlist on me AMPLIFY WOMEN! BLACK HISTORY! WE STAND WITH THE BANNED! Like this is what I want from my MUSIC app.

ggm 9y ago

I don't get it. They don't own the IPR so at best it's a thin revenue model on giant cashflow to agencies. All it's got is cost side risk and a thin skin of ui advantage. Maybe it's me. I have no track record identifying winners or losers.

z3t4 9y ago

today at the gym i heard some awesome songs so i asked what it was and they said "spotify radio". its impossible for me to recreate that list.

mancerayder 9y ago

Maybe they have enough capital now to adjust the Discover Weekly algorithm, which provides a weekly recipe of 30 songs that have no basis in what I listened to or have in my playlists. I do get to discover Millennial sleepily-singing voices to a disco beat and a 'laid back' riff that promises to stay in the background (thanks to a faux garagey sound). Is that what Indy means? For pre-selected music that I listen to frequently, I use playlists with Spotify. For truly discovering music with algorithms that work, I use Pandora. I do notice there is NOT a lot of overlap at times, due to bizarre licensing restrictions and deals.

KozmoNau7 9y ago
And I can only say that Discover Weekly and the Daily Mixes are absolutely spot-on for me.
- therealdrag0 9y ago
  It works great for me when I'm not experimenting. But if I listen to an album of a genre I don't normally listen to my next weeks playlist gets pretty spoiled.
  - KozmoNau7 9y ago
    You can switch to a private session if you don't want to affect your recommendations, just a heads up.
    - therealdrag0 9y ago
      Woah. Thanks for pointing this out; never thought about that.
f4rker 9y ago
Spotify playlist are shockingly bad for a big company with so much data. "Relaxing classical" 3nd song has fast piano Well done guys.

diogenescynic 9y ago

Congrats to them, but I don’t think I’ll ever understand renting music. I can understand Netflix’s success because movie content is much less replayable and more expensive, but music is relatively cheap to own your own collection. I love music, but I don’t understand the appeal of Spotify and Pandora—I’d rather take the cost of subscription and build out my library over time.

KozmoNau7 9y ago
Think of it as a subscription to a larger library than you'll ever be able to amass yourself. Sure, you'll collect all of your favorite music, but what if you want to branch out a little? What if you want recommendations that are tailored for you, based on your music taste? For me, one of the main services Spotify provides is access to occasional music, stuff that I wouldn't bother to collect, but is nice to have on hand, either for parties or just curiosity. The other main service is their recommendation engine, which reliably presents me with interesting bands and albums that I didn't know about, but fit very well with my tastes. I consider $10/month a bargain for those services. (I still keep an offline collection of my absolute very favorite albums, of course)

udfalkso 9y ago

Maybe they'll make an Apple TV app now? Does anyone know why that doesn't exist yet?

rs86 9y ago

Google can kill them at any moment with Play.

KozmoNau7 9y ago
Really? How?

abalone 9y ago

Not enough people talking about this: The fundamental challenge for Spotify is they have to make money while Apple Music doesn't. Apple Music can run break-even as a platform feature, like the App Store was (at least in the early days). Or they could pay artists more with that margin and get more exclusives. Either way, it's a fundamental long term competitive disadvantage for Spotify.

vlunkr 9y ago
I know it’s just an acecdote, but I don’t know a single person that uses Apple Music. Spotify already has a huge library and mindshare. It was too little too late for Apple IMO
- abalone 9y ago
  Which is why you should never draw conclusions from anecdotes.[1] [1] Apple Music is set to surpass Spotify in paid US subscribers this summer https://www.theverge.com/2018/2/4/16971436/apple-music-surpass-spotify-us-subscribers https://www.theverge.com/2018/2/4/16971436/apple-music-surpa...
  - pertsix 9y ago
    Most of these users are converting from their shrinking iTunes business.
    - abalone 9y ago
      So what’s your point? Apple Music is still overtaking Spotify this year. And just like iTunes, they don’t need to make much money on it.
      - KozmoNau7 9y ago
        Only in the US, Spotify is huge in Europe and other parts of the world, where Apple Music is basically unknown.

f4rker 9y ago

$30B value company needs to get their shit together. So many major albums have the wrong release date.

LeicaLatte 9y ago

Congrats Spotify!

rdl 9y ago

I'm glad the DPO model was successful -- would be great if it, or something like it, became the default.

rado 9y ago

Not enough for a native desktop app?

ConcernedCoder 9y ago

If the original investors want to sell their shares, I'm not sure it's a good sign?

nielsole 9y ago
VCs usually aim for very high ROI. Even if your investment still increases in value more than market rate interest rates, for a VC it might be more valuable to sell them to preserve its own metrics (each year you keep the shares, your average ROI decreases).

allenleein 9y ago

1/ Spotify is not Netflix. There won’t be a Netfix for music. 2/ Netflix, with almost 118 million subscribers worldwide, has allayed concerns about its slowing growth by reminding analysts there are more than 700 million broadband households. Spotify, with 71 million paying users, touts an even larger number in its filing: 1.6 billion payment-enabled smartphone owners expected by 2021. #Growth 3/ Spotify delivers more than 70 percent of its sales to music rights holders, despite efforts to improve profit margins. 4/ Universal Music Group, Sony Music Entertainment, Warner Music Group, Merlin (the representative for many independent labels), which own 87% of the music on Spotify as measured by streams. 5/ It seems highly unlikely Spotify’s Cost of Revenue will improve much in the short-term: those record deals are locked in until at least next year. 6/ It means once the growth of Spotify starts to slow even a bit, it will has very serious trouble. 7/ Netflix is building its own studio to produce shows on its own. Spotify says it has no interest in signing artists, or paying for artists to record. (They don’t have the capital) 8/ However, it has another plan to reduce its reliance on its main suppliers: by making them less relevant. “The old model favoured certain gatekeepers. Artists had to be signed to a label,” chief executive Daniel Ek wrote in a letter included in the filing. “They needed access to a recording studio, and they had to be played on terrestrial radio to achieve success. Today, artists can produce and release their own music. Labels, studios, and radio still matter, but in a cluttered landscape, artists’ biggest challenge is navigating this complexity to get heard. We believe Spotify empowers them to break through.” (Ref 4/: Those labels own 85% of the music on Spotify as measured by streams. Progress of empowering: 15%.) 9/ This goal sounds like “the Podcast model” started in 2005, unfortunately, by their biggest competitor: Apple. Spotify's Dilemma: https://allenleein.github.io/brains/2018/03/spotifys-dilemma https://allenleein.github.io/brains/2018/03/spotifys-dilemma

deleted 9y ago

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