Eyes on Spotify as music innovator debuts on stock market

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NEW YORK, NY - APRIL 03: Traders work on the floor of the New York Stock Exchange (NYSE) on the morning that the music streaming service Spotify begins trading shares at the NYSE on April 3, 2018 in New York City. Trading under the symbol SPOT, the Swedish company's losses grew to 1.235 billion euros ($1.507 billion) last year, its largest ever. Spencer Platt/Getty Images/AFP

Spotify on Tuesday makes its long-awaited debut on the stock market as the streaming platform that has shaken up the music industry hopes to strike a chord with investors.

The Swedish company will begin trading later Tuesday as SPOT on the New York Stock Exchange, bringing a fresh new stage to a service founded a decade ago.

In a rare move, Spotify will list existing shares directly on the bourse rather than issuing new stock, allowing its founders and investors to maintain control and avoiding the cost of hiring Wall Street underwriters.

Spotify will nonetheless be closely watched as it starts trading as the market weighs whether to believe that the company — big in cool factor but short on profit — has a rosy future.

John Tinker, analyst at Gabelli and Co., kicked off assessments of Spotify by rating it a hold — advice neither to buy nor sell.

While anticipating that Spotify share prices could start off strong, he saw risks for the company — which has yet to extract itself from the red.

“Apple is growing faster than Spotify and has a different business model whereby music does not have to be profitable on a standalone basis,” he said.

Spotify said in a regulatory filing that it had 159 million monthly users including 71 million paying subscribers — twice that of closest rival Apple Music, which the iPhone maker launched in 2015 to win a slice of the growing streaming market.

Spotify warned last week that its sales growth was likely to slow this year, but that it still expected to post a narrower annual loss.

– Making streaming mainstream –
Spotify has helped change the way much of the world listens to music by popularizing streaming — unlimited, on-demand songs online.

In the United States, the largest music market, revenue from recorded music grew a robust 16.5 percent in 2017, marking the first time since 1999 at the dawn of online music that the business has expanded for two years in a row.

The growth — in line with global trends — was almost entirely attributable to the rise in streaming subscriptions, according to the Recording Industry Association of America.

Spotify has also managed to mollify critics, at least for now, thanks to its massive reach.

Pop superstar Taylor Swift, who once railed that Spotify was short-changing artists and boycotted the service, recently debuted a video as an exclusive to the platform.

Few prominent Western artists still refuse to stream on Spotify other than rap mogul Jay-Z, who runs his own fledging rival Tidal, and his wife Beyonce.

But Spotify faces rising competition not just from Apple but from retail behemoth Amazon, which has boasted of quick growth for its new service.

Google is also looking to cash in further from streaming through YouTube, while Facebook has sealed deals with the three major record label conglomerates in anticipation of further music projects.

– ‘Ups and downs’ –
Spotify’s 35-year-old chief executive and co-founder Daniel Ek, in a blog essay before the stock listing, said he believed his company had ample “room to learn and grow.”

“I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities,” he wrote.

“Nothing ever happens in a straight line — the past 10 years have certainly taught me that.

“My job is to ensure that we keep our foot on the pedal during the ups, so that we don’t become complacent, and that we continue to stay the course with a firm grip on the wheel during the downs.”