Spotify Finally Finds a Way to Lower Licensing Deals and Go Public

Spotify Finally Finds a Way to Secure Licensing Deals and Go Public
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Spotify Finally Finds a Way to Secure Licensing Deals and Go Public
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Jon Aslund (CC by 2.0)

Your paid subscription numbers keep jumping. You’re alone atop the music streaming mountain. You have your eyes set on an IPO. So, what do you do? If you’re Spotify, you prepare to offer Premium-only content.

Last August, several sources spoke in confidence with Digital Music News.  They noted that Spotify would prepare to offer exclusive content to paying subscribers only.  One plan to limit content entirely to premium subscribers.  The second would involve time-restricted exclusives.

Now, it’s happening.  Nearly two years later, the Financial Times has all-but-confirmed the news.  And a premium-only tier will help Spotify secure the types of licensing deals it desperately needs.

According to details tipped, the Swedish streamer would restrict the biggest album releases to only paid subscribers for a period of time.  In turn, the major music companies have agreed to trim their licensing rates.

For years, Spotify was streaming music without securing long-term music licenses.  In fact, the company hasn’t had a long-term contract in two years with Universal Music’s Vivendi.  Now, sources told the Times that licensing talks have “picked up considerably.”

In fact, the Swedish streamer and major labels could finally ink deals.  Yet, talks could stall once again (fair warning).

If Spotify finally lands licensing deals with major companies, it could potentially boost the company’s IPO appeal.  This year, Wall Street once again rejected the streamer’s public listing. The reason?  The company simply hasn’t made enough money.  And licensing costs are a big reason for that.

In a recent funding round, investors valued the company at $8.5 billion.  Just last year, the company added 20 million subscribers, ahead of Apple Music, Amazon Music, and Pandora.

The company has also brought in major revenue for record labels, so some sort of concession is likely.  The big three labels have posted record revenue thanks in large part to streaming, with a massive chunk coming from Spotify.

Sounds great, except that the company currently sits on a ticking debt time bomb.  Last year, the streamer took on two loans: one for $500 million, and another for $1 billion.  Investors reportedly demanded the IPO occur within one year, a deadline since passed.

Net losses also jumped in 2015 to nearly $186 million.

If Spotify manages to secure the deals by pushing timed-exclusive premium content, this may help them finally launch their long-awaited IPO.  But wait: will a Wall Street IPO listing finally help the company make a profit?

5 Responses

  1. Spotifan

    “This year, Wall Street once again rejected the streamer’s public listing. The reason? The company simply hasn’t made enough money.”

    Why the fuck do u keep saying that? Spotify never filled up an IPO application, so Well Street never rejected them. Stop inventing bullshit.

    • Remi Swierczek

      Spotify is a DOPE sold by Daniel Ek to British boys at UMG who are consistently improving shrinkage of $300B of music business obvious to an IDIOT to $25B of ads and subs hopefully by 2025.

      Today AppleMusic, TIDAL, Deezzer, Google or Amazon are Ek’s junkies carving in stone $25B music business TOMB at UMG request!
      YouTube with VEVO and Pandora are just other colorful decorations in mummification
      of music industry.
      Sir L! Please get a horse, sharp sword and START $300B music harvest!

  2. Anonymous

    Hahaha someone beat me to it. Paul, I can’t believe it took you so long to update your blog with this “story.” Your disdain for Spotify above all others is so obvious. I already know how excited you’ll be if Spotify fails, but how disappointed will you be if it succeeds? And even though you hate Spotify, using their old logo is just bad journalis– sorry, blogging.

  3. music stowaway

    Everything nowadays is about getting super rich through taking a start-up into
    an IPO – The IPO is seen as the ticket to riches – If you have a tech/web product like a smartphone or web app or a website that builds enormous traction.. then it becomes
    highly valuable .. even if it’s not making money.. because everything is about getting
    market share and attention..

    There may be a billion sites on the Internet – but out of those billion, most people only gravitate to the same old few each day.. think about it.. how many web sites or apps do you frequently use/visit?

    Profitless Prosperity is still worth something..

    Even DMN has a level of traction and value because it’s a daily or near-daily
    destination to many people – particularly those in the recorded music business.

    Remember, most of the billion web sites get no traffic at all.. so if you have a site that draws traffic then you’re already ahead.. and if it draws significant traffic then
    you’ve got something of value, maybe a lot of value..

  4. Anonymous

    It sounds like Spotify has been one of the biggest obstacles preventing the labels from windowing new releases. This proposal is a step in the right direction, but frankly, it doesn’t seem like enough. If I were a label, in exchange for lower royalties, I would want free reign to use any distribution strategy I see fit, including windowing new releases as permanent downloads for up to 6 months. The labels don’t need Spotify as badly as Spotify would like them to believe they do. There are enough solid alternatives in the marketplace now that the labels can turn Spotify’s relevance into the equivalent of MySpace’s quite easily.