Spotify is considering a direct listing, instead of traditional IPO
- Author: Fernando Stephens Apr 07, 2017,
Apr 07, 2017, 2:23
On Tuesday, the company announced it had signed a multi-year global licence agreement with Universal Music Group which, according to industry analysts, is expected to reduce the amount of money paid to the record major for rights, and would thereby enable Spotify to generate its first profits.
"Starting today, Universal artists can choose to release new albums on Premium for two weeks only, offering subscribers an earlier chance to explore the complete creative work, while the singles are available across Spotify for our listeners to enjoy".
Under the agreement, the share of revenue Spotify pays labels in royalties, now thought to be 55 percent or slightly more, will instead in most circumstances range between that level and about 52 percent, depending on what subscription targets the company hits, according to sources with knowledge of the deal.
Spotify Ltd., owner of the popular music streaming service, is considering listing its shares on public exchanges without raising any new money, according to a person familiar with the company's plans.
Spotify has been on a path to a public offering ever since it borrowed $1 billion in convertible debt a year ago.
Spotify, worth $8.5 billion as a private company, has been rumored to be seeking an IPO for some time. A successful IPO would benefit the major labels, which have equity in the company, although executives now consider the revenue it -generates to be far more important.
Spotify still needs to broker long-term deals with Sony Music Entertainment, Warner Music Group and the independent label community.
Furthermore, "having a public stock would also give Spotify's investors and employees the opportunity to cash in their shares", it said. By granting exclusive access for their premium users, Spotify hopes to negotiate better licensing rates with record companies. "The focus should be more on a push to limit free".
Artist managers argue that they need to know more detail about the deals done between the labels and the streaming services, so that they can properly audit the streaming royalties their artists receive.