
Spotify files for its IPO - rahulchhabra07
https://www.axios.com/exclusive-spotify-files-for-its-ipo-2522109160.html
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sparkling
I don't think this is a good long term investment.

Disclaimer: I worked for a Spotify competitor in the past, so i have a pretty
solid understanding of how the business works.

I think it is a bad investment for one simple reason: Spotify purchases its
main product (music) from a oligopoly. I'd estimate that 95%+ of the tracks
streamed (by total playtime) are from one of the 3 major music labels:
Universal, Sony or Warner. That includes sublabels that in some cases may have
a seperate deal with Spotify, but at the end of the day are still part of the
big 3. Imagine you are a Sony executive, walking by a news stand and the Wall
Street Journal Headline is "Spotify Q2 earnings 30% up". What are you gonna
do? You will squeeze them, make them pay, just enough that they survive. And
Spotify has zero negotiation power here. If Sptify fails to have a deal with
any 1 of these 3 labels, they become useless overnight. People will switch to
Apple Music, Amazon PrimeMusic, Tidal or any other service quickly. It doesn't
matter if Spotifys app is slighty better than the competitors software if they
lack 1/3 of the music.

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pembrook
This is the same problem Netflix & Amazon have been successful in combating.
The answer is to become a content owner by competing with the big labels
directly.

All Spotify needs to push the big labels back on their heels is to sign a few
top 40 artists of their own.

I might be wrong but I remember reading something like 90%+ of streams on
music services are of songs currently on the charts. Capture the popular
culture like Netflix has and the labels will start rolling over on rates.

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BinaryIdiot
> This is the same problem Netflix & Amazon have been successful in combating.
> The answer is to become a content owner by competing with the big labels
> directly. > All Spotify needs to push the big labels back on their heels is
> to sign a few top 40 artists of their own

No way that's going to work. Music is VASTLY different from video. In video it
takes more time and resources to produce each one and replays are rare. In
music everything is super cheap to produce and replays are off the chart.

If Spotify became their own label and signed 100 of the top artists, their old
songs are STILL with the previous label and will likely never leave. Spotify
still NEEDS those songs or it's SOL.

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pembrook
But if the majority of plays on Spotify are of the current hit pop songs at
any given time, Spotify still has the power even if they don’t own the old
songs.

Go look at the most played songs on Spotify of all time. It’s not the Beatles
and Michael Jackson’s back catalog. We’re talking Chainsmokers and Imagine
Dragons and Ed Sheeran.

~~~
seanmcdirmid
AmazonPrime’s most played list has more than a few oldies in it, especially
around Christmas. The non-young crowd is also much less into new music and
crave the older stuff actually. A streaming service can totally survive on
those users alone, probably. If I could get it at some discount, I would
totally pay for a streaming service that didn’t have any songs made within the
last ten years. I could live on songs made in the 60s alone (and that’s way
before my time).

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kinkrtyavimoodh
Anyone feel worried about an environment where your competitor products are
basically all propped up by big companies who couldn't care less whether they
made money as long as they fly low of the anti-competitive radar? Of course
your lemonade stand can sell lemonade for a cent a cup if your rich daddy will
pay the other 99 cent from his pocket.

For eg. Spotify had to lower their price from $10 per month to $15 per month
for 6 (family plan) because Google Play Music offered that price point along
with YouTube Red. Of course, neither Google nor Apple need to make money from
their music services. Funnily or sadly enough this is true for almost
everything Google does other than Ads.

Most people would agree that Spotify is a better music player while each of
Google's music apps are bad in different ways, but online subscription
services are a market where people want to nickel and dime.

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on_and_off
Disclaimer : I worked for one of Spotify and Google competitors.

>Most people would agree that Spotify is a better music player while each of
Google's music apps are bad in different ways

I am not so sure about that. Spotify is on top of its game : adjusting the
loudness of tracks, using ogg, .. I am however pretty sure that to almost all
the users, it makes no difference.

Furthermore, it is very hard to differentiate as a music service. Most of the
features are present in all the services (albums, playlists, AI generated
recommandations, radios, podcasts, etc) .

Regarding the price, it is up to Spotify to start creating its own content in
order to make it go down. Right now the real issue IMO is that the majors are
dictating an extremely high monthly price for the service.

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rzanella
Spotify's radio is a 10-song loop, another service w/ better radio and same
price would definitely steal some users.

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TheHegemon
Google Play, for the kind of music I listen to, seems to have the best radio
feature.

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warent
I've always had great results from Google Play Music. There are a couple
things that could be improved, but I'm big user of it.

Disclaimer: I'm a Google employee (but I've been using Play Music since long
before my employment)

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chollida1
Will be interesting as not many high profile companies try this back door way
of listing.

This seems much more like a forced IPO to get someone cashed out than the
typical IPO to raise funds.

One thing to remember if you are investing, is that there will almost
certainly be no restrictions on selling stock, meaning that employee's,
C-level execs and early investors won't have the typical lock up period.

And since they aren't using an underwriter, there is no back stop for the
shares sliding on the first day of trading.

This doesn't do a whole lot to inspire confidence in the company, Look for the
CEO to make an announcement that they will be holding their shares, or be
prepared to buy into a company while the people on the inside are getting out
of.

As a user, I'm really excited for them, as an investor not so much. Hopefully
they'll release some good news leading up to their IPO which could be as early
as March.

~~~
nyreed
There is a time pressure for them to IPO given the terms of some loans they
took out in 2016. It seems the loan included penalties tied to how long it
takes them to IPO. Apparently for every six months thereafter till the stock
lists, the interest rate will keep going up by 1%.

([http://www.sramanamitra.com/2017/03/08/2017-ipo-prospects-
sp...](http://www.sramanamitra.com/2017/03/08/2017-ipo-prospects-spotify-
delays-again/))

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JonFish85
Isn't the point of an IPO generally to raise funds? In this case, it's just
allowing people to sell their shares to the public, right? From the company
standpoint, this is almost certainly a negative: additional oversight &
reporting to do, no funds raised. I guess a positive is that shareholders can
cash out, but as an investor, isn't that a giant red flag?

I guess as an investor, I don't see why I'd buy Spotify shares from an
existing shareholder -- my "investment" is not going to the company, it's a
bit like buying shares on the market of a mature company, except Spotify isn't
that -- it's a money-hole with a highly questionable future. Is there any
reason for someone to buy existing shares to expect things to turn around?
They aren't getting a capital infusion, it's business as usual except with the
additional burden of being a public company.

~~~
oli5679
One advantage a new investor has over someone who provided Spotify with
Seed/Series A is greater diversification. Suppose I'm a VC that invested in
Spotify, it succeeded and my 20 other seed investments all failed. My
retirement wealth is entirely dependent on it's success in the future - your
comment outlines why this is risky. Since I am risk averse, I can sell this to
a pension fund who will keep it as 1% of their total holdings and we can both
be better off, even if we have the same view of the company's likely success
in the future.

Of course, if everyone has too optimistic a view on Spotify's future success
(could well be the case, I don't have an informed opinion) then buying the
stock is a bad idea. But there is not necessarily anything sinister going on
when founders/early investors cash out. From Spotify's point of view, they
have an inventive to keep these people happy, balanced against the greater
regulatory/oversight costs that you highlight.

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kingraoul3
That can be accomplished with private market tenders though.

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SnowingXIV
I hope they do get funding so they can support messaging again, one of the
reasons I came back to Spotify was for one of my most beloved features.
Sending tracks to friends within the application, but then found out it was
removed. I still subscribe to Spotify, but the "copy link" send to friend via
text is so much worse than being able to just message within.

~~~
bhj
Yes, I would like to see more social features that aren't tied to Facebook. I
know it's not their core competency, but it's odd that the Friends feature
requires FB even though they support "standard" non-FB user accounts. And a
timeline-esque view of who's been listening to what at-a-glance would be neat.

~~~
cyberpunk0
No. No. No. I just want a well running, clean looking, audio player. Im sick
of companies trying to make apps social and grow them beyond where they are
great trying to incorporate bullshit that ruins the app. Spotify is great for
local music, streaming, podcasts, etc. All this bullshit video and social crap
they push into it ruins it. Imo IPOs kill almost any decency in a product

~~~
andyhmltn
A massive reason I prefer spotify is because of the social aspect of it. Being
able to look at a friends playlists is a pretty big deal for me. I would agree
if they were pushing something like statuses or likes but I think Spotify's
implementation of social actually makes the product much better

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philfrasty
Is there anything to expect from Spotify aside from music streaming? Anything
that might differentiate them in the long run?

Seems really hard to build a sustainable music-streaming business when all
major competitors can simply subsidize this rather complementary part of their
business (AZ, Apple, etc.).

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notyourwork
I agree, this seems like a cash out for a market leader who will decline over
time. (For context, I am a paid subscriber and still don't see how spotify
remains leader over time due to cost.)

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everdev
Crazy timing with them just getting hit with a $1.6B lawsuit.

[https://www.reuters.com/article/us-spotify-
lawsuit/spotify-h...](https://www.reuters.com/article/us-spotify-
lawsuit/spotify-hit-with-1-6-billion-copyright-lawsuit-idUSKBN1ER1RX)

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samfriedman
I wonder if the lawsuit was purposefully timed near the IPO announcement, in
an attempt to heap extra pressure on Spotify to settle quickly.

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CPLX
Yes, that's precisely how lawsuit strategy works.

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samfriedman
I'd be curious to know how much of the strategy on the IPO side takes this
kind of "out of the woodwork" stuff into account.

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sova
Spotify has been doing one feature wrong for as long as I can recall: The
Previous Track button will always navigate to the previous track in the list,
no matter what you played before, and if there is nothing in the playlist
before that track then the button effectively does nothing. Come on! PREV
stands for Previous not List Index - 1. Other than that, Spotify works well
enough that I do appreciate the service, even if it smells of monopoly.

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Shywim
Isn't that the standard behavior on every music player?

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e12e
Don't know, but not having a useful history of tracks is really annoying. Why
I've landed on cloudplayer for Android - it allows you to go back to "that
nice track three songs back when I was biking down a hill" (when shuffling a
large, partially unknown selection).

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olejorgenb
The play queue view have a history "tab" though

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sova
There's a history tab?! Thank you kind friend

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pricetag
They announced that this was coming a while ago, but I’m curious- is there any
financial advantage to them IPOing now with respect to the lawsuit?

Like say if the lawsuit cleans them out, does being a publicly listed company
vs a private one make for a different outcome?

Looking to hear from someone who’d have some domain knowledge on this stuff.

EDIT: Or possibly the other way around, does this allow them to finance the
costs of the lawsuit?

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zegerjan
Generally companies try to settle fast before the IPO so there are less
concerns to invest.

No domain knowledge btw, just seen it happen a couple of times before

~~~
unixhero
Hey, better than nothing! Thanks.

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coverband
Any estimates on the market valuation? Not mentioned anywhere in this article,
and the $20B number floating around sounds quite high to me.

For comparison, Vivendi/Universal is at $35B (based on its share price) with
20K+ employees in multiple divisions vs. Spotify in just the music streaming
business with 1600 employees.

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sdnguyen90
Record labels are already in a dynamic where the streaming services have at
least equal leverage. Playlists are already taking over radio which is where
the labels would give you the most value.

More artists are publishing their music independently. I think the negotiation
power of older records owned by record labels will diminish because the next
generation of independently owned records will outweigh them.

The thing I'm unsure of is how Apple Music vs Spotify is going to play out. I
feel that Spotify is currently an overall better product but Apple has had
major cultural impact with its curation which IMO is more valuable than
building software.

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oh_sigh
How will this IPO fare for, say, software developers who worked there for 5 or
6 years?

I had an offer on the table from them in 2011 but decided to go with Amazon
instead. I'm always curious how the road not taken would have turned out.

~~~
rohansingh
As an engineer who accepted an offer from Spotify in 2011, worked there until
last year, and am still holding on to a good portion of my grant... it's
mixed.

From both my experience and that of folks I've spoken with, the last year or
two has been quite good for us. That said, you're probably much better off
financially if you accepted an offer from a FAANG-type company around the same
time and stuck with them.

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thisisit
The lawsuit might make it difficult for them to IPO:

[https://www.inc.com/jeremy-quittner/lawsuits-can-sink-an-
ipo...](https://www.inc.com/jeremy-quittner/lawsuits-can-sink-an-ipo.html)

~~~
krutzger
Or maybe the lawsuit was timed to arrive just now and or extra pressure on
Spotify?

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partycoder
Hot potato.

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lerie82
I'm not a business major but releasing their IPO while being sued for billions
sounds like a bad idea. Someone please explain this to me.

~~~
mickronome
My very non-qualified thoughts about this, I'm definitely out of my depth
here, but it's kind of fun to think about these things :)

Not releasing it as planned could very well be worse. It could easily be seen
as an implicit acknowledgment that the plaintiff has legal standing, and that
their claims have merit. This could then lead to a situation where an IPO
would have to be delayed, potentially for years until it all has been played
out in court.

I'm quite sure most potential investors will assume that this particular suit
is likely to be timed based on rumors of the IPO to interfere maximally with
it. Maybe in the hope of either a quick settlement or to effectively create an
out-of-court punishment via lowered IPO valuation to deterr others from trying
to manuever the legal terrain in a similar way as Spotify is claimed to do.
Whether the plaintiff has standing or not.

Going forward without deviating from schedule, or even quicker than schedule,
sends what is probably the strongest possible message that could be sent to
bolster the IPO and minimise value loss. It says: "We're not afraid of this
suit"

Risk estimates in preparation for an IPO regarding a company like Spotify
almost certainly includes assesment of risks by various actors that might want
a piece of the cake through legal action.

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blondie9x
Wow way to try to maximize how much you can dump employee options and stock
into an IPO before the lawsuit and others like it materialize. This is nuts.
Lawsuit yesterday start of IPO process today.

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rrdharan
As others have pointed out, it's much more likely that the folks filing the
lawsuit chose the timing of their filing to coincide with the predicted IPO to
maximize PR exposure and increase the pressure for a quick settlement.

