Spotify Seeks to Build Music Industry Platform Based on Its Tools, Investor Day Told
Spotify CEO Daniel Ek shunned “pomp or circumstance” of a conventional initial public offering road show at the company’s first investor day Thursday, saying the traditional model “isn’t a good fit.” Noting the typical IPO requires a quiet period, he said: “We don’t think that’s the right thing to do.” Spotify has allowed employees and shareholders to buy and sell stock for years “and that shouldn’t stop just because our stock is becoming more widely owned,” he said.
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Spotify will provide financial guidance March 26 for Q1 and this year, said Paul Vogel, vice president-investor relations, before trading is to begin on the New York Stock Exchange April 3. The company isn’t selling any stock when shares begin trading April 3: “We’re entirely focused on the long-term performance of the business,” said Ek. As of March 9, Spotify had 183.57 million shares outstanding, said a Wednesday amendment to the company’s F-1 statement.
Ek described Spotify as being “in the second inning.” He told investors Spotify is bigger than they thought, with more potential. Ek cited 72 percent of users under 34 years and 43 percent under 24. Growth is strong in North America, Latin America and Europe, he said, and Spotify is starting to see “meaningful growth” in Asia, helped by its investment in Tencent. Spotify's prospectus claims (see 1803010064 or 1803010044) twice the number of monthly active users as Apple Music.
On growth plans, Ek outlined pillars: its Freemium advertising-based offering, which he called an on-ramp to paid subscriptions; Spotify’s “ubiquity” on a wide range of mobile, home-based and car players; and personalization. More than 50 percent of engaged free listeners will end up becoming paid subscribers, said Chief Financial Officer Barry McCarthy, formerly with Netflix.
The music streamer touts strength in ubiquity “across all platforms,” said Ek, seeing the streaming world multiplying into different platforms. Spotify's global reach with 160 million-plus users gives it an advantage to work across all platforms, said Ek. He cited Amazon in the home, Android in the car and in emerging markets, iOS on smartphones in the Western world.
A crucial part of Spotify’s vision is a two-sided market strategy serving fans and artists. Ek noted a music industry transition to an ecosystem based on a platform built around Spotify tools that can help struggling artists.
There are more talented artists “than the pipes of the traditional music industry could handle,” said Ek, which led to industry having to pick “winners and losers,” he said. “It’s always been too expensive to do proper marketing for a concert in a theater with 500 seats” and too expensive to record and market an artist lacking hits, he said.
Not only can unknown artists gain visibility, but a well-known group also could make use of data to better target audiences in a city, Ek said. “All of a sudden Metallica is adjusting its concert set list from city to city to make sure they play the most popular songs in each of those markets based on Spotify data.”