Friday, March 16, 2018

Spotify continues its unconventional stock market journey with live-streamed investor pitch | UNLIMITED | CMU

Spotify Press Announcement

Having put down their case in writing last month, top execs from Spotify yesterday took to the stage to explain why their streaming music business is not only doing damn fine right now, but has a glorious future ahead of it, despite all the mega-losses to date.

Various Spotify execs – including top boss Daniel Ek and chief money man Barry McCarthy – all took part yesterday in a live-streamed laid back briefing for potential investors. In it, they set out their vision for the streaming music company ahead of its direct listing on the New York Stock Exchange next month.

The direct listing is, of course, a highly unusual way to list on a stock exchange, with no new shares being issued, as would be the case under a more common Initial Public Offering. The live-streamed investor briefing was also an innovation, replacing the closed-doors pitch sessions to Wall Street types that would usually precede a big IPO.

Indeed, so much effort had Spotify put in making its investor briefing nothing like an investor briefing, there seemed to be as much chatter among the investment types in the audience about the method of going public as the business case for why people might want to buy shares.

When it came to that business case, the Spotify execs acknowledged that massive scale was required to make the current streaming model work. Therefore – they said – they would continue to prioritise growth over profits.

Recognising that their biggest global rivals at the moment are tech giants Apple, Amazon and Google, they also talked up how their platform was all about the music, rather than being – in part at least – a tool to sell other services or devices. Meanwhile, they reckoned, Spotify – more than any other streaming service – had cracked the music discovery thing, and that was a big USP.

Spotify’s free level has been key in enabling the company to reach the scale it has, with almost double the number of paying users as its closest competitor Apple Music. Freemium to sell premium remains a key part of the business model. Although – as in last month’s SEC filing – the Spotify execs also said that they thought there was the potential to further boost ad income, so that loss-leading freemium wasn’t quite so loss-leading.

Ad revenues currently account for about 10% of Spotify’s overall revenues, and McCarthy said he’d like to double that. Though he conceded that it “remained to be seen” whether that ambition could be realised. Nevertheless, he reckoned, there was a lot of advertising spend yet to be accessed by the digital music market.

Ek, meanwhile, talked up the benefits his business has delivered and will deliver to the music industry, which has seen recorded music revenues go back into growth on the back of the Spotify-led streaming boom. Although, of course, that’s not stopped some in the music community from seeing Ek’s company as the enemy at times.

He also spoke to those Wall Street types in the room about his company’s unconventional route to the investment market. “You won’t see us ringing any bells or throwing any parties”, when the company finally lists on 3 Apr, he said. “Since Spotify isn’t selling any stock in the listing, we’re really entirely focused on the long-term performance of the business”.

With the pitch now delivered in written and spoken form, all eyes will be on SPOT on the New York Stock Exchange next month to see whether investors have bought the narrative that this streaming music business is indeed the one that can reach the kind of scale required to realise some profitability in the long-term.


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