Spotify, the world’s biggest online music streaming service has filed for an IPO and intends to directly list its shares. The stock of the company will trade on the NYSE under the ticker symbol SPOT. By directly selling its shares the current investors as well as employees of the music streaming service will now be in a position to offload their stakes. There will be no issuing of shares which means there will also be no listing price. This IPO route is considered low cost and more democratic.
In its prospectus Spotify indicated that annual sales amounted to $4.99 billion last year. This was an increase of 39% compared to previous year where the revenues were 2.95 billion euros. Last year the net loss of the company also increased by 129% and this was attributed to the costs of financing debt valued at $1 billion which was obtained in 2016.
Currently Spotify boasts of 71 million paying subscribers spread across the globe. This is about twice the number on Apple Music, which has 36 million paying subscribers. When Spotify includes the number of subscribers who don’t pay a monthly fee but instead use ad-supported streams, the total number of monthly average users is 159 million. Other players in the sector include Amazon Music Unlimited which boasts of paying subscribers numbering 16 million and Pandora Media which has 5.48 million.
While the premium subscription of Spotify costs approximately $9.99 per month, the music streaming service indicated that the ad-supported streams had great potential for growth . Apple Music does not have an ad-supported stream. Spotify’s churn or the number of subscribers who opted out of the premium service declined to 5.1% at the close of 2017 compared to a figure of 6.9% witnessed at the beginning of 2016.
Rate of churn
“This has been a question we’ve been wondering for a long time: how sustainable is Spotify’s model? This is the very first time we’re seeing public disclosure about churn, and the news there is really good,” Larry Miller, music business program head of Steinhardt School at New York University, told Reuters.
According to Spotify the average revenue that each subscriber generated for the company was 3.6 times what the music streaming firm spent on customer acquisition costs at the close of last year. This assisted in boosting the free cash flow of the company to a figure of 109 million euros at the close of 2017.