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Spotify Goes Public, Hopes Of Better Future For The Company


04/05/2018


Spotify Goes Public, Hopes Of Better Future For The Company
The online music streaming company Spotify has been valued at $26 billion as the shares of the company started trading in the New York exchange.
 
No new shares have been issued by the company but those that had been held by the private investors of the company have been put up for sale which is an unconventional move.
 
Spotify is the global market leader in video streaming services but the company is yet to make profits and this flotation of the company marks a turning point for it.
 
Chief executive of the company Daniel Ek said in an open letter: "We are still early in our journey and we have room to learn and grow."
 
The company has in recent years becomes a world leader in the music streaming services and has added millions of members to the free-to-use ad-funded service of the company even as a large number of them have been transformed into paid subscribers. The company started off as a small upstart Swedish music platform.
 
With twice as the number of customers as Apple Music, the company now has over 71 million paid users and it the leader in music streaming companies globally.
 
The revenues earned by Spotify has been less than the costs that the company has had to incur in fees to recording companies for music rights. The difference between the two is however getting smaller. 
 
The investors of the company have been promised to be given a chance to cash their investments as they had supported the company because it was on a growth path. This meant that the company had to go to the stock exchange sooner or later.
 
However, this could also bring out a new chapter for the company.
 
Mark Mulligan at MIDia Research says that the company might have the chance to make the necessary changes because going public means that there would be more pressure on it to churn out profits.
 
"Once you're a tech stock - more than with a normal listed company - [investors] expect you to do stuff fast, change fast," he says.
 
"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."
 
The recording companies are given more than half of the revenues earned by Spotify. But because the labels have the rights over two thirds of the music that is played on Spotify it is unlikely that any bold moves would be made by the company very soon.
 
While expecting a phase of evolution for Spotify, Chris Hayes at Enders Analysis says that this might not also be a direct fall out of the listing.
 
"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.
 
(Source:www.bbc.com)