Founded in 2006, Spotify is a Swedish music-streaming platform that was launched in October 2008. Since April 2018, the company has been listed on the New York Stock Exchange under the ticker symbol, SPOT.
Its IPO was done through a direct listing thanks to Goldman Sachs, Morgan Stanley and Allen & Co. Direct listing means that the mentioned banks didn’t help the company raise its funds – they were not paid as underwriters, because Spotify started trading its existing shares directly on the market to common investors in April 2018, targeting a $1 billion IPO.
The company is working on transforming the way we listen to music “by moving from a “transaction-based" experience of buying and owning audio content to an “access-based" model allowing users to stream on demand,” describes Spotify.
The company enables consumers to listen to the music they like due to a “proposition-simplifier” business model. For this reason, Spotify is increasing its clients’ consumption of music.
- Sometimes referred to as the “Netflix of music”, Spotify has truly transformed the way we access and listen to music in the world. It is the biggest selling music streaming service and it reported $4.99 billion in revenues and $1.46 billion in losses in 2017. Still, the company’s gross margin went from 14% in 2016 to 21% in 2017.
- The company suggested that it might soon be paying less money to record labels. This could in turn, increase its revenues and support its growth and stock price. Most of its offering is controlled by the Big Three – Universal Music, Sony Music and Warner (87% of Spotify’s songs).
- Spotify offers more than 40 million songs to a community of 191 million users, which includes 87 million subscribers across 78 markets (as of September 30th, 2018).
- In April 2018, the company unveiled a new ad-supported tier that focuses on personalisation. Ads through the free service are helping the company stay afloat while earning a user base.
- In November 2018, the firm launched its services in the Middle East and North Africa, particularly in UAE, KSA, Kuwait, Oman, Qatar, Bahrain, Algeria, Morocco, Tunisia, Jordan, Lebanon, Palestinian Territories, and Egypt. This brings the number of markets to 78 in total.
If you believe Spotify’s disruptive business model will continue attracting more customers, then investing in this firm might be a profitable opportunity. It’s also a great way to diversify your portfolio. Remember to always mitigate your risk to better control your trading capital.