Spotify’s Tricky Path To IPO

Spotify And The Big Three

Spotify may feel like the future of music, but the company cannot meet the demands of its 100 million users without mainstream content controlled by major labels

The Numbers

Spotify recently announced that it has 39 million paying users, up from 30 million in March of this year.

  • Aggregate Revenue: $2.2 billion.
  • Revenue via Advertising: $219 million.
  • Revenue via Subscriptions: $1.95 million.
  • Royalty Payout Costs: $1.8 billion.
  • Revenue sans Royalty Costs: $400 million.
  • Net Loss: $194 million.

Sisyphus

Spotify pays a staggering slice of its revenue in royalties to record labels. In 2015, the $1.8 billion figure — its royalty payout — was a full 85 percent of its top line.

Summing

All of this points to a reality that Spotify’s potential IPO is based on and subject to more than just locking down new contracts with the major labels. Never mind the fact that the company can’t live without those licensing deals; it inherits an inflexibility that is pervasive in the music industry among content controllers (the labels) and content distributors (such as streaming companies). Said inflexibility has far-reaching ramifications as it creates a reality where Spotify will always be looking over its shoulder to make sure it can renew its major label deals.

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Master Relationship Builder @Zero2OneNetwork 🚀 | @ATLTechVillage Advisor 😎 | Speaker 🎙️ | Prev. CEO @glipple + published @crunchbase, @mattermark + more ✍️

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Adam Marx

Adam Marx

Master Relationship Builder @Zero2OneNetwork 🚀 | @ATLTechVillage Advisor 😎 | Speaker 🎙️ | Prev. CEO @glipple + published @crunchbase, @mattermark + more ✍️