Wall Street is rejecting their IPO (again). A $1.5 billion debt pile is now a ticking time bomb. Major labels are taking 70+% of revenues. Is this the year that Spotify implodes?
Spotify is a damn good streaming music service. And they’re beating almost everyone at this game. That includes some of the largest companies in the world: Apple, Google, Amazon, and Microsoft. In fact, Spotify has double the number of paying subscribers that Apple Music has. Spotify may also have more customers than all of these competitors combined.
But at what cost?
Now, it looks like Spotify is postponing their long-awaited IPO. Again. According to details leaked by TechCrunch, the mega-streamer won’t be going public until at least 2018, thanks to continued Wall Street rejections. “The delay would give Spotify more time to build up a better balance sheet and work on shifting its business model to improve its margins,” TechCrunch reports.
“The financial climate has changed…”
A major problem is that Spotify simply isn’t making enough money. Go figure. They’re growing fast, but the underlying financials are rotten. “Three to five years ago, you could have an IPO based solely on user growth and promises of the future,” a TechCrunch source relayed.
“But the financial climate has changed now. Today you have to show some path to profitability, especially at the valuation that Spotify has been targeting.”
That might explain why Spotify is frantically trying to renegotiate its major label licenses. Currently, the company is paying at least 70% to the big three: Universal Music Group, Sony Music Entertainment, and Warner Music Group. According to data released last year, Spotify has paid a cumulative $5 billion in royalties since inception, none of which includes overhead, taxes, and guaranteed equity shares (if an IPO occurs).
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