SHARE
Daniel Ek co-founded Swedish streaming company Spotify in 2006

Shares in the music streaming firm Spotify will be publicly traded for the first time later on Tuesday when the firm debuts on the New York market.

The flotation marks a turning point for the firm, that, after 12 years, has not yet made a profit.

Spotify’s listing, which could value it at $20bn (£14bn), is unconventional: it is not issuing any new shares.

Instead, shares held by the firm’s private investors will be made available.

What was once an small upstart Swedish music platform, has grown rapidly in recent years, adding millions of users to its free-to-use ad-funded service, and converting many of them to its more lucrative subscription service.

It is now the global leader among music streaming companies, boasting 71 million paying customers, twice as many as runner-up Apple.

What Spotify must do to survive

How Spotify came to be worth billions

So far costs and fees to recording companies for the rights to play their music, have exceeded Spotify’s revenues, although that gap is narrowing.

And some analysts predict the listing will speed-up Spotify’s race towards profitability.

“Up until now it was the warm-up lap,” says Mark Mulligan at MIDia Research. “When that’s done we’ll see a bit of a shift in strategy and direction.”

Why is Spotify listing its shares?

The firm made a commitment to investors who backed it as the company was growing, that they would be given the chance to cash in their investment. So Spotify had to list its shares sooner or later.

But it could also herald a new phase for the firm.

Being publicly traded will put pressure on the management, and could provide the excuse they need to make changes, says Mark Mulligan.

“Once you’re a tech stock – more than with a normal listed company – [investors] expect you to do stuff fast, change fast,” he says.

Back

5. So what will change?

“So far they’ve been treading a very fine line between being the dramatic new future of the music business but simultaneously being the biggest friend of the old music industry by giving record labels a platform to build out of decline,” says Mr Mulligan.

“To go to the next phase [Spotify] will have to stop talking out of both sides of its mouth, which it does at the moment. And stop being so friendly to the record companies.”

More than half of Spotify’s revenue goes directly to the record companies. But they are not likely to make any bold moves immediately, since the labels also control two thirds of the music that Spotify plays.

Taylor Swift has released recent videos exclusively on Spotify

Chris Hayes at Enders Analysis says while it may not be as a direct result of the share listing, he also expects Spotify to evolve.

“I think over time they’re going to have to diversify their offering,” he says, helping to set them apart from a sea of rival streaming services.

Back