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| Is Spotify really worth $23bn? | Is Spotify really worth $23bn? |
| (35 minutes later) | |
| Spotify has filed to list on the New York Stock Exchange in a move that may value the world's biggest music streaming service at more than $23bn (£16.7bn). | Spotify has filed to list on the New York Stock Exchange in a move that may value the world's biggest music streaming service at more than $23bn (£16.7bn). |
| In an unconventional move, the firm will list shares directly on the NYSE. | In an unconventional move, the firm will list shares directly on the NYSE. |
| Rather than issue new shares, Spotify's existing shareholders will take their shares directly to the market. | Rather than issue new shares, Spotify's existing shareholders will take their shares directly to the market. |
| That will allow early investors and employees to sell their stakes and is not intended to raise new funding. | That will allow early investors and employees to sell their stakes and is not intended to raise new funding. |
| Mark Mulligan, a UK-based music industry analyst at MIDiA Research, said: "It's about a company that is letting its investors get their returns so it can move on to the next stage of its career." | Mark Mulligan, a UK-based music industry analyst at MIDiA Research, said: "It's about a company that is letting its investors get their returns so it can move on to the next stage of its career." |
| Spotify has offered a streaming service since 2008 and has 159 million monthly active users including 71 million paid subscribers globally. | Spotify has offered a streaming service since 2008 and has 159 million monthly active users including 71 million paid subscribers globally. |
| Apple Music has about 36 million subscribers, but unlike Spotify it does not offer a free tier supported by advertising. | |
| What Spotify must do to survive | |
| How bands are escaping the music industry snake pit | |
| Analysis: North America technology reporter Dave Lee | Analysis: North America technology reporter Dave Lee |
| The fact that Spotify exists at all is something of a minor miracle: unknown Swedish company convinces major record labels to upload millions upon millions of songs for people to listen to without buying them. It must have been quite the pitch. | The fact that Spotify exists at all is something of a minor miracle: unknown Swedish company convinces major record labels to upload millions upon millions of songs for people to listen to without buying them. It must have been quite the pitch. |
| Sure, the labels get royalties but it's pennies - fractions of pennies - on what they used to get from "traditional" online sales. | Sure, the labels get royalties but it's pennies - fractions of pennies - on what they used to get from "traditional" online sales. |
| Regardless, it's been clear for a long time that streaming is the music industry's future. | Regardless, it's been clear for a long time that streaming is the music industry's future. |
| On Wednesday, Spotify announced it would go public - but that's not to say its here to stay. The company has long been surrounded by threats, and it's no different today. | On Wednesday, Spotify announced it would go public - but that's not to say its here to stay. The company has long been surrounded by threats, and it's no different today. |
| Apple, Amazon and Google are all in the music streaming game, all with direct hardware with which to serve its users music. Spotify doesn't. | Apple, Amazon and Google are all in the music streaming game, all with direct hardware with which to serve its users music. Spotify doesn't. |
| And while Spotify has signed deals with all the "big three" record labels - Warner, Universal and Sony - it's the music executives that still hold the bargaining chips. | And while Spotify has signed deals with all the "big three" record labels - Warner, Universal and Sony - it's the music executives that still hold the bargaining chips. |
| Read more from Dave Lee here | Read more from Dave Lee here |
| Calculating value | Calculating value |
| Spotify said its shares sold for between $37.50 and $125 each in private transactions last year and more than $132 this year. The company's potential valuation is based on a combination of stock price and how many shares it has outstanding. | Spotify said its shares sold for between $37.50 and $125 each in private transactions last year and more than $132 this year. The company's potential valuation is based on a combination of stock price and how many shares it has outstanding. |
| The prices shared by Spotify suggest a range of $6.3bn to more than $23bn. | The prices shared by Spotify suggest a range of $6.3bn to more than $23bn. |
| The higher figure would make Spotify one of the biggest public debuts of a tech company since 2012, said Kathleen Smith, principal at Renaissance Capital, which provides institutional research and manages exchange traded funds focused on new public companies. | The higher figure would make Spotify one of the biggest public debuts of a tech company since 2012, said Kathleen Smith, principal at Renaissance Capital, which provides institutional research and manages exchange traded funds focused on new public companies. |
| She cautioned, however, that private investors have tended to value firms more highly than public markets in recent years. | She cautioned, however, that private investors have tended to value firms more highly than public markets in recent years. |
| Snap, owner of Snapchat, for example also had an almost $30bn market capitalisation after its first day of trading last year, but it has struggled to sustain that figure. | Snap, owner of Snapchat, for example also had an almost $30bn market capitalisation after its first day of trading last year, but it has struggled to sustain that figure. |
| "This could be an issue - could it possibly sustain those valuations?" she said. | "This could be an issue - could it possibly sustain those valuations?" she said. |
| In its filing with the Securities and Exchange Commission, Spotify said it has made annual losses every year and lost more than €1.2bn in losses in 2017. | In its filing with the Securities and Exchange Commission, Spotify said it has made annual losses every year and lost more than €1.2bn in losses in 2017. |
| However, revenues rose almost 40% to €4bn last year, according to the filing. | However, revenues rose almost 40% to €4bn last year, according to the filing. |
| Europe is its largest region, with 58 million monthly active users, followed by North America. It is also making inroads in Latin America and other parts of the world. | Europe is its largest region, with 58 million monthly active users, followed by North America. It is also making inroads in Latin America and other parts of the world. |
| Churn rates, which measure cancellation, have fallen, while the time spent using the service has increased. | Churn rates, which measure cancellation, have fallen, while the time spent using the service has increased. |
| "All of that stuff paint a really strong story to investors that they're on the right path," Mr Mulligan said. | "All of that stuff paint a really strong story to investors that they're on the right path," Mr Mulligan said. |
| Future plans | Future plans |
| In its filing, Spotify says it aims to "unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by these creators." | In its filing, Spotify says it aims to "unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by these creators." |
| The firm said it had paid more than €8bn in royalties to artists, music labels, and publishers since its launch. | The firm said it had paid more than €8bn in royalties to artists, music labels, and publishers since its launch. |
| The filing also hinted at plans to expand beyond music into other forms of radio. | The filing also hinted at plans to expand beyond music into other forms of radio. |
| "With our ad-supported service, we believe there is a large opportunity to grow users and gain market share from traditional terrestrial radio," it said. | "With our ad-supported service, we believe there is a large opportunity to grow users and gain market share from traditional terrestrial radio," it said. |