Spotify Officially Files for IPO With 71 Million Premium Subscribers and 159 Million Monthly Active Users

[robertsmithfinance]

With the loss widening year by year, how will Spotify compete with Apple Music. It’s going to be chaos for Spotify.

https://news.alphastreet.com/spotify-files-for-ipo-the-first-major-ipo-in-2018/

 

[OldSchoolMacGuy]

They're gonna need that money if these current lawsuits aren't in their favor. They stand to be hit with BILLIONS in judgements and are still paying out hundreds of millions they've already lost from using songs without permission and not paying royalties.

 

[RudySnow]

they’re profitable. Ultimately they’ll have a monopoly on streaming and probably reach 50bn in revenue someday. It takes time to build the infrastructure until they become profitable. It’s all about growth race right now - all their money is going into beating the default installed Apple Music and others.

You lost me in your contradiction. Either they are profitable or they are not profitable. To clear this up, it is a fact that Spotify has never made a profit; in fact, I believe the point of the IPO is to first repay all of the hundreds of millions of dollars they owe their investors who took a risk and intended a return that Spotify can’t pay up. At least Apple has recently admitted they don’t make a dime on Apple Music, but they have other assets and other reasons to continue pushing signups to their streaming service. Spotify has NOTHING else going for it A they continue to bleed money due to royalties, etc., which I predict is their future. Now Spotify will be held to a profit by their new investors, and I wish them luck with that impossible task.

 

[saudade]

Make Spotify for Apple TV please and Nasdaq and me we will love you.

 

[Zeke92]

I wonder if Apple takes a loss from Apple Music. If companies that don’t support a free tier can’t even break even with paid subscribers only. What does that say about the streaming business model in general

 

[Mescagnus]

Good luck, Spotify. Sinceriously (that's a word, look it up )

For me, HomePod changes things, in favor of Apple Music. HomePod and the fact that Spotify is removing Spotify Connect from certain Bang & Olufsen music systems.

And it's actually amazing how easy it is to export Spotify playlists to Apple Music with the Houdini iOS App

 

[Cloudkicker]

If Apple could get away with a separate IPO of Apple Music --or most logical -- iPhone, you know they would. lol In a way, I wish they would. Because I estimate 70% is "Apple: The iPhone Company."

 

[nameischarles]

I wonder what the market share Apple Music has on the Android platform?

 

[Alan Wynn]

This has to be a joke. Or you’re some kind of Apple employee. Spotify is many times better than AM.

You have a strong argument. Anyone who likes Apple Music better must be a paid Apple employee. To you, it is many times better, to me it is about the same, but with a smaller library without access to my personal rips with iTunes Match and much more expensive as I cannot use the discount iTunes gift cards I get all the time.

[doublepost=1519854298][/doublepost]
they’re profitable. Ultimately they’ll have a monopoly on streaming and probably reach 50bn in revenue someday. It takes time to build the infrastructure until they become profitable. It’s all about growth race right now - all their money is going into beating the default installed Apple Music and others.

Nope, they lost $1.5 billion this year and over $677 million last year. They have never made a profit. A large cash infusion will help them go even longer without making a profit, but there is no guarantee that it will prevent their failure. We do know that they are at risk of being overtaken by Apple Music in the U.S. market this summer which is not a good thing for them. Not having any other revenue source means that they eventually need to figure out how to deliver their service profitably. For them to reach $50 billion in revenue, they would need to increase their size by a factor of 10. Seems pretty unlikely.

[doublepost=1519854406][/doublepost]
Did you frequent the Discover Weekly playlist? Or the “Release Radar”? Their algorithms are literally hundreds of times better at suggesting music than any other company out there, and I’m willing to bet a significant amount of their money went to AI research. You sound like a paid AM employee as well.

I have used both services. I personally have not seen that much of a difference between Apple Music and Spotify. It might be better, but not enough better for me to give up Apple Music on my Apple Watch and AppleTV, nor to get me to pay more for their service. I guess that must mean I am a paid Apple employee as well.

I wish them well. Having more players is a good thing.

 

[Bawstun]

You lost me in your contradiction. Either they are profitable or they are not profitable. To clear this up, it is a fact that Spotify has never made a profit; in fact, I believe the point of the IPO is to first repay all of the hundreds of millions of dollars they owe their investors who took a risk and intended a return that Spotify can’t pay up. At least Apple has recently admitted they don’t make a dime on Apple Music, but they have other assets and other reasons to continue pushing signups to their streaming service. Spotify has NOTHING else going for it A they continue to bleed money due to royalties, etc., which I predict is their future. Now Spotify will be held to a profit by their new investors, and I wish them luck with that impossible task.

Splitting hairs? Maybe I worded it wonky but my intent is the same. I meant to say their business model WILL be profitable, or perhaps already is, but they’re happy operating in the red out of necessity. Twitter didn’t make a dime until a few months ago. It’s all about user base and growth. Just look at their numbers - they’re over 1/10th of a billion users and are growing at a crazy rate.

 

[neutralguy]

A company that takes in $XXX but still manages to lose $YYY overall is not a profitable company. Who the hell would invest in that?!?

FYI MacRumors—can you post how much they lost in 2015 and 2016 as well.

Lol. Have you heard of Tesla? Amazon?

 

[RudySnow]

Lol. Have you heard of Tesla? Amazon?

HA HA HAAAAAA

Yes, I have. They each have/had DIVERSIFIED PORTFOLIOS. Spotify doesn’t have that.

LOL!!!!!!!!!!!!!!!!!!
[doublepost=1519866931][/doublepost]

Splitting hairs? Maybe I worded it wonky but my intent is the same. I meant to say their business model WILL be profitable, or perhaps already is, but they’re happy operating in the red out of necessity. Twitter didn’t make a dime until a few months ago. It’s all about user base and growth. Just look at their numbers - they’re over 1/10th of a billion users and are growing at a crazy rate.

Obviously you have no clue how to read a business forecast, a business P&L statement, been on an earnings call, or can just use basic economic theory to understand this: Twitter made a profit in ONE quarter. EVERY OTHER quarter LOST money. That means that the profit they earned in one three-month period then goes toward what is owed in their piggy banks to make up for all of the years of losses.

That’s like saying I haven’t earned a paycheck or paid myself in ten years (120 months) and then, one day, I come home and tell my wife, “hey, honey, I made a thousand bucks this quarter! I made a profit compared to all the other 117 months there was no income!” Unless the house, car, electricity, gas, internet, water, property taxes, income taxes and any other debts are paid off, that’s not a “profit” but a sub-marginal gain for a glimpse in time.

Spotify cannot survive this. Even Twitter says it needs more users to keep earning each quarter, but it’s shedding them like mad and bots don’t count.

 

[Apple_Robert]

I will stick with Apple Music and Apple stock. Have no interest in buying stock from a company that is continually losing money.

 

[69650]

Good luck to them. I would hate to see Apple dominate music streaming as they would just kill any innovation as they did with music downloads.

 

[prasand]

Interesting.

I see now.

So Spotify will go IPO, allow the stock to establish its own flow, then stabilize / consolidate, and a few months later release their first hardware products, to diversify revenue streams, and allow the stock to climb.

Though I’m not a Spotify user (Apple Music), it’s actually a good strategy.

It seems many here are neglecting or do not know that Spotify will start releasing hardware soon:

https://www.macrumors.com/2018/02/20/spotify-job-listings-physical-products/

 

[Carnegie]

Spotify hasn't filed for an IPO. According to its registration statement, it's doing a direct listing. It will be going public, but it won't be doing a public offering of stock.
[doublepost=1519874204][/doublepost]

And now the fun begins. Profit and loss will have real impact now. But they are going to get a huge cash injection. Spend wisely.

Spotify isn't getting a huge cash injection from this. It isn't doing a public offering, just going public.

As I explained (not in great detail) elsewhere, it has effectively gotten a capital injunction (in the form of reduced debt) and had existing shareholders diluted by having a considerable amount of convertible notes converted to shares. That often happens with an IPO, if raised funds are used to pay down existing debt. But in Spotify's case it's happened another way.
[doublepost=1519874777][/doublepost]

With the loss widening year by year, how will Spotify compete with Apple Music. It’s going to be chaos for Spotify.

https://news.alphastreet.com/spotify-files-for-ipo-the-first-major-ipo-in-2018/

Most of that increase in Spotify's annual loss was caused by an increase in the value of its shares. Its operating loss didn't increase substantially. And its gross margin increased dramatically. Its ad-supported service even had a positive gross margin for 2017 (which surprises me).

Because Spotify had a considerable amount of debt in the form of convertible notes (and had outstanding warrants), an increase in the value of its shares represented an increase in its finance costs. But it didn't really lose that money. It's just that the discount at which the holders of those convertible notes and warrants could convert them or buy shares increased - because the value of Spotify shares increased - and that discount was, in effect, accounted for as a finance cost.
[doublepost=1519875016][/doublepost]

Searched on Robinhood. No results for SPOT. How do I buy it?

Its shares aren't listed yet.

In other words, it has announced its intention to go public but it hasn't gone public yet.

 

[Michael Scrip]

Lol. Have you heard of Tesla? Amazon?

It's a little disingenuous to compare Spotify to Amazon.

Yes... the one thing they have in common is that they both started out making no money.

But Amazon went from selling only books... to selling nearly everything. It should also be noted that they invested heavily in expansion which is where most of their money went in the first 10 years. And it looks like it worked... as they're a monster in retail and infrastructure today. And profitable.

Spotify, on the other hand, started as a music streaming service. Yet 10 years later they're still just a music streaming service. And the one product they sell is encumbered with huge licensing fees that makes it difficult (or impossible) for them to get ahead and become profitable.

As you can see... their stories are nothing alike.

Sure... you can say "Amazon didn't make any money... and look at them now!"

But that doesn't mean the same will be true for Spotify.

An earlier comment reminded me that Spotify is expanding into hardware. Gosh... that's a tough market. Low-margins abound. It's a crowded market too.

They'll never sell enough speakers to offset a billion in losses.

 

[ArtOfWarfare]

If you truly have ~ $6K in total investments, based on your posts, you should just invest in index funds. Stay away from individual stocks

Also, based on your profile, you have been on MacRumors since 2007 and posted several thousands of times. Yet, you only own 1 share of Apple stock. Is that true?

$5K, but otherwise, yes, all true. 80% of it is in index funds, plus a share of AAPL, 3 shares of TSLA, and a share of GRPN (Groupon. Don't know too much about them - Robinhood gifted it to me yesterday when someone from these forums used my referral code.) I only started doing any investing besides a 401K nine months ago. My plan is to stick mostly with index funds, sometimes buying a few shares from companies that I feel confident that I understand well enough and consider undervalued. When AAPL was $140, I knew it was undervalued. Now that it's $180, I feel less certain. But other forum members have convinced me to hold out for $200.
[doublepost=1519875456][/doublepost]

It's a little disingenuous to compare Spotify to Amazon.

Yes... the one thing they have in common is that they both started out making no money.

But Amazon went from selling only books... to selling nearly everything. It should also be noted that they invested heavily in expansion which is where most of their money went in the first 10 years. And it looks like it worked... as they're a monster in retail and infrastructure today. And profitable.

Spotify, on the other hand, started as a streaming music service. Yet 10 years later they're still just a music streaming service. And the one product they sell is encumbered with huge licensing fees that makes it difficult (or impossible) for them to get ahead and become profitable.

As you can see... their stories are nothing alike.

Sure... you can say "Amazon didn't make any money... and look at them now!"

But that doesn't mean the same will be true for Spotify.

An earlier comment reminded me that Spotify is expanding into hardware. Gosh... that's a tough market. Low-margins abound. It's a crowded market too.

They'll never sell enough speakers to offset a billion in losses.

As Spotify grows larger, they'll have more leverage in negotiating better licensing terms.

 

[bluespark]

This has to be a joke. Or you’re some kind of Apple employee. Spotify is many times better than AM.
[doublepost=1519854298][/doublepost]

Did you frequent the Discover Weekly playlist? Or the “Release Radar”? Their algorithms are literally hundreds of times better at suggesting music than any other company out there, and I’m willing to bet a significant amount of their money went to AI research. You sound like a paid AM employee as well.

Lots of people seem to prefer Apple Music, in large part because their playlists are created by humans rather than algorithms. It might depend on what you listen to, though. I personally like Apple Music very much, although my main gripe is that it doesn't play well with lots of third-party devices or apps. It would be nice if there were a way to access Apple Music from the app/device of my choice (without AirPlay, etc.).

 

[Apple blogger]

I thought they were burning out of cash right? And they had only a few months/ years to live at that burning rate.. now I hope they spend the public’s money in a good way..

 

[Michael Scrip]

As Spotify grows larger, they'll have more leverage in negotiating better licensing terms.

If only the record labels weren't greedy buttholes...

Seriously though... you might have a point.

I can't imagine the record labels budging too much though. Maybe a couple percentage-points tops.

I doubt it would move the needle in Spotify's favor.

This makes me wonder... how big is the addressible market for music? It's impressive that Spotify has 70 million paying customers and 160 million total. Then there's Apple Music's 36 million and the other odd millions from other services...

But there are BILLIONS of people who enjoy music. Isn't the non-streaming music market far bigger than Spotify/Apple/others combined?

The record labels would focus on that market before they start lowering the rates for Spotify, right?

 

[Bawstun]

HA HA HAAAAAA

Yes, I have. They each have/had DIVERSIFIED PORTFOLIOS. Spotify doesn’t have that.

LOL!!!!!!!!!!!!!!!!!!
[doublepost=1519866931][/doublepost]

Obviously you have no clue how to read a business forecast, a business P&L statement, been on an earnings call, or can just use basic economic theory to understand this: Twitter made a profit in ONE quarter. EVERY OTHER quarter LOST money. That means that the profit they earned in one three-month period then goes toward what is owed in their piggy banks to make up for all of the years of losses.

That’s like saying I haven’t earned a paycheck or paid myself in ten years (120 months) and then, one day, I come home and tell my wife, “hey, honey, I made a thousand bucks this quarter! I made a profit compared to all the other 117 months there was no income!” Unless the house, car, electricity, gas, internet, water, property taxes, income taxes and any other debts are paid off, that’s not a “profit” but a sub-marginal gain for a glimpse in time.

Spotify cannot survive this. Even Twitter says it needs more users to keep earning each quarter, but it’s shedding them like mad and bots don’t count.

You are wrong. Spotify is on track to become the name in digital streaming music - and will make billions.

 

[Carnegie]

As Spotify grows larger, they'll have more leverage in negotiating better licensing terms.

Spotify has already gained considerable leverage when it comes to negotiating licensing agreements. That's a big part of why its gross margins have increased so much. Its content costs aren't growing as fast as its revenues are.

 

[paul4339]

Spotify says its number of premium subscribers has grown 46 percent year over year, and its monthly active users has grown 29 percent year over year. The company earned $2.37 billion in 2015, $3.6 billion in 2016, and $4.99 billion in 2017, but posted a loss of $1.5 billion in 2017.

According to the F-1 Sec filing they didn’t post earnings of $2.37B, $3.6B, $4.99B... those are revenues, not earnings.

So far it looks like all they posted are losses (and the losses are widening). Read page 10 and 11 of the F-1 Filing - Consolidated Financials.

 

[Alan Wynn]

As Spotify grows larger, they'll have more leverage in negotiating better licensing terms.

Based on their rates of growth, Apple Music will surpass Spotify in the U.S. (according to several sources). Spotify needs the artists more than the artists need Spotify. Amazon, Apple and Google, all have rival services willing to pay the rates being charged. Cable companies despite an 85% penetration at their high, still have very little pricing leverage with content provides and usually cave when a set of channels is pulled over revenue disputes.

It is always possible that things will be different this time, but I would not bet on that. Apple Music is growing because of users like me who accept that Spotify might be a bit better at discovery than Apple Music, but not enough to offset Spotify’s lack of presence on my Apple Watch and HomePod.

On the hardware front, they have two choices: be Amazon/Google or be Apple/Sonos. Amazon and Google subsidize their hardware to either sell ads or other products. Apple and Sonos sell their hardware at a profit and focus on its sound quality. If they go for mass market, they need to compete against subsidized hardware and, as it is unlikely that they are going to develop their own assistant, do so using someone else’s assistant, making differentiation hard. If the try to compete against Apple/Sonos (examples, not lumping them together), they are competing against established brands and will likely have a hard time building a large market share. Neither seems like a great financial play for them.

This is not to say it is impossible for them to create a successful strategy in the direction they are heading, but the odds are against them.