Will Spotify go public without an IPO?
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The reason it hasn't happened yet seems straightforward. Companies are hesitant to be beta testers of a new model where so much is at stake. No one ever got fired for running an IPO through Goldmen Sachs.
The principle of people making obscene amounts of money doesn't bother me one bit. It would be nice if teachers had higher salaries, but NBA players make more money than teachers for many objective reasons. This situation is different.
Does anyone think this is the best we can do? One quick example:
http://blogs.reuters.com/felix-salmon/2013/03/11/where-banks...
Spotify isn't doing a DPO nor an IPO. They will simply allow their shares to be traded by third parties. Since Spotify, itself, is raising no cash there isn't a need for an underwriter nor an auction process. Each investor will need to figure out listing, trading, clearing and settlement, et cetera mostly on their own.
[1] https://en.wikipedia.org/wiki/Direct_public_offering
[2] http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?arti...
Partly as a result, they massively underpriced
The cost of taking risks can be very high. There are not inconsiderable likely downsides.
However the point is that after considering this and all other value add, it's still vastly over priced, and is propagated by a happenstance of a few unhealthy market dynamics.
Please, take a look at the link I posted above. Do you agree with how those fees are applied?
I would think at a minimum Spotify would convert all equity holders to common stock and would register the shares with the appropriate clearinghouse depending on where they were listing. Even if they didn't register with an exchange they could be be traded over the counter. More likely they would register with an exchange and take care of those mechanical details for their investors.
The real risk here is that they list but don't get any analyst coverage and no one wants to act as a market maker for the stock initially. Analyst coverage is part of the quid pro quo for an IPO, and companies typically want to see analyst coverage of past IPO clients, with BUY ratings on those stocks.
Personally I don't think coverage commitments matter that much. Modern markets are price efficient. Spotify is big enough that they would get coverage and market makers without paying the IPO tax. And they can do a much cheaper follow-on offering after the shares have been public, with greater certainty as to the price.
For smaller companies it's much easier to languish without anyone paying attention to your stock, and this would be much riskier.
Also, the Google result is really hard to draw any conclusions from. It's one data point vs. many underwritten deals of which some have done better. some have done worse.
The the main point is I do not see any reason, at least in principle, that the current model could be vastly improved.
Worse outcomes have happened: http://www.nytimes.com/2012/07/15/business/goldman-sachs-and...
People paid through the nose for IBM PCs because a lot was at stake. But not because IBM actually lessened their risk, but because it took a little time before people realized they were leaving money on the table unnecessarily.
The way it's supposed to work is that a number of investors do due diligence, decide on the price they think it's worth it to them, and make their bids. Once enough pledges been made, the lowest price is given to all bidders.
However an investor may decide to join in without any effort put into due diligence. Instead he will decide to bid high and rely on others to set the fair price.
First, the "honest" investors end up paying for the free riders. Second, the free-riders end up crowding in and bidding up the price above the reasonable level. Consequently the "honest" investors put all the effort into it and end up with nothing to buy at their determined price. In the end "honest" investors end up not participating at all, so the Dutch auction thing just fell apart.
In short, smart money was in charge setting correct price, but smart money was crowded out by dumb money. This problem is not unique to Dutch auctions, but it appears that that's where it is the most acute.
1. Suppose two funds compete, and the both partake in a Dutch auction. They end up with having the same stock at the same price at the dutch auction, and so the same income. However the free-rider gets fewer expenses so his profits are higher. The diligent fund is losing to the free rider in profits. After a while there are no more diligent funds.
2. The diligent fund prices stock at "proper" value, the free-rider prices it higher hoping to pay the lower, "proper" price but getting ahead of the diligent fund in the queue. If there are many free-riders they all end up in the queue before the diligent fund, so the latter may get less stock, or no stock at all. After a couple of such experiences the diligent funds stop partaking in any new Dutch auctions.
Growing your losses whilst losing market share is not an enormously attractive value proposition to investors.
Examples:
- Redesigning the client multiple times
- moving from native clients to essentially a bundled browser
- removal of lyrics feature
- can only store 3333 songs offline on a device - 10000 songs is the limit for the library
- Still no Hi-Fi option
- Can't add third party songs to the cloud library
And the competition is definitly rising: For example, Apple Music offers lyrics, a song limit of 100000, can store all of those songs offline, play back on 10 different devices at the same time and store all those songs offline. Also, you can drag and drop the songs that are unavailable into your library, which makes them available on all of your devices.
Once Apple Music releases a web player (or a client for Linux), I'm done with Spotify. For the moment, I need it for my desktop, which runs Linux.
On the other hand, they added things like making discovering new music much easier, like "Daily Mixes" and "Discover Weekly", which - again, I don't have any hard data to back this up - made a ton of users very happy.
I use Spotify as much as conceivably possible (~20 hours per week) and haven't heard a peep of discontent from anybody. Totally agree - Spotify is incredible.
Lyrics; people listen to music and then enjoy singing along. This little thing called karaoke supports a whole industry, for engineers and non-engineers alike, so people can get together and sing songs.
Redesigning the client. New interfaces are scary and different for non-engineers.
Can't add third party songs to cloud library. Non-engineers understand that some licensing nonsense means they can't get Taylor Swift on their Spotify, and then... just don't use Spotify, because all their music is on the Apple.
I'm not including "native client to bundled browser" as something non-engineers care about, but people do ask "why does the new version of $program make my laptop fans get all loud?"
I have much better results playing a full album on youtube and letting youtubes auto play feature pick the next album for me. I've discovered a half dozen artists that way on the last year.
My daily mixes never flow correctly. I'll have a softer, technical indie track followed by a technical heavy metal song. It's bad enough that I can't use them at all.
My friends and I average over 20 hours a week as well and we're all pissed about their recent decisions. The removal of messaging/direct sharing was the final straw for me.
If there isn't a "I do not like this" feature for a machine learning feature, that UX isn't good. Other users have raise this concerns too (google it).
Supposedly, the feature works at least in part by analyzing your playlists and giving recommendations based on what the people with similar songs in their playlists have there as well. He claimed to be receiving less Finnish rap m after removing his playlists with northern Swedish rap, so you could try that approach if you still have any Chinese/Korean playlists.
I just remove the few offending songs from my discover weekly, which I don't find too much of a hassle, but it doesn't seem to learn from that.
As a big fan of data analysis I've also noticed that they no longer accurately report or record user preferences and instead heavily weight popular artists. They also only sent out the "Year in Review" to people that were subscribed to their spam emails.
Those two things are what brought me to them over Google Play Music. I'm currently in the process of switching back.
Also, complaining about stuff like "only" being able to store 3333 songs is pretty silly.
Better headphones make the illusions of the psychoacoustic models work better, much like a stage magician will be more convincing with more precise execution of his tricks.
Or in other words: if you are good at identifying the differences between lossy and lossless that might be because you have golden ears. But it could just as well be because you are using tinny cans. (Or any combination thereof)
I have been a premium user of spotify for over a year now and I actually really love it. Maybe I don't use as much features as other people do.
I have a bunch of playlists (18) and love their discovery feature as well. I listen to it every time when I am at work - or doing chores at home - and sometimes during the commute on my phone. Same goes for 2 family members.
I don't miss the lyrics feature - I used it occasionally but it was shortly after I started using spotify so it's hard to miss something you have not really had the opportunity to use for a long time.
I have used their client on Windows and Mac (work), Linux (home) and mobile (android) and actually did not have issues with either of them. For what I use it (listening to music..) it does everything I want and does so perfectly.
Storing songs offline? No thank you, if I wanted to do that, I would just torrent the albums I like.
About the Hi-Fi option, they do have a HQ option but I am not sure which "quality" that actually is. I'm not an audiophile though, but I bet the average user isn't. So they might not care.
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But, like I said, to me it is essentially just a cloud music player and should not be anything else. I don't use any of the social features, I'm surely not an audiophile, and I can actually not compare it to Apple Music.
(Sidenote: The pricing is really good as well, at least the premium model where you can add family members).
EDIT: Just to clarify, I'm not affiliated with Spotify, and as always, this is just my opinion and yours might be different which is completely OK. :-)
Like the parent I really would like to be able to complete my library with my own music files when I can't find something on Spotify. That would be massively convenient for me and it doesn't seem like it would be a massive hassle for them to implement (as long as they limit the maximum amount of storage to something reasonable). I'm sure many users would love to be able to add their own audio files and podcasts to their library to access them from their spotify client everywhere.
I would also really love if they added a truly random mode. I get that they try to have a "clever" shuffle mode that's supposed to avoid playing the same artist back to back and things like that, but for most of my playlists I don't actually need that and spotify ends up replaying the same tracks before it's exhausted the rest of the playlist. As a side effect it also seems to favor certain titles over others in my experience. Just give me an option to turn on "dumb" random mode and I'll be happy.
"Hi-Fi" mode is probably snake oil but I guess it'd make for a nice marketing gimmick. I'm personally perfectly content with the premium audio quality as it is currently.
I still don't plan on canceling my subscription but I'm mildly annoyed that in this past year I've seen features disappearing while nothing of great value was being added.
The problem isn't the storage, but figuring out who the rights holders are and ensuring they get paid for those streams too. And it gets even more complicated for things you might have that Spotify doesn't have in their catalogue vs. is not allowed to let you play due to geographical restrictions. There's no easy way to guarantee correctness and completeness of the metadata uploaded by others whereas they can reasonably trust what is given to them by music labels.
Dropbox "allows" for it but they're in a grey area, just like other services have been able to skirt the issue. It's likely to not be a big enough concern for anyone right now to go after that particular use case.
Spotify supports 320kbps. Lossless streaming is borderline a pointless luxury, and I'm happy not to subsidize it for people who want to stroke their gold ears or egos. There's luxury services for that.
My problem with Spotify is their lack of TFA. My account had a unique password that was somehow stolen a year and a half ago, at which point I realized users' full names, address, DOB, etc are all exposed on the profile screen once logged in. There's absolutely no email or text verification for new signins either. That, and the android app runs like shit, pushed me over to Play Music.
People don't care how an app is made usually. I really dislike the 10000 song limit too but none of my friends seem to know or care. A hi-fi option def can't matter much to people or Tidal would've been more popular for that reason, no?
I have my own ax to grind with offline music not scrobbling to last.fm even close to properly but I'm not going to even pretend that more than a fraction of their users care or know about the feature. Similarly I don't think people would have an issue with 3k+ offline track limit. That's a lot to me.
Apple Music does seem to have a lot of good features though. Give you that.
The move to Apple Music wasn't entirely without friction. There was no very good migration story, only third party apps and the results of these were so-so at best. But this was a one time cost, since then it's been a smooth ride. I pretty much only use apple hardware and the fact that Apple Music works great on all platforms is a huge win for me – Spotify doesn't even have an Apple TV app which was also a pretty big reason for my switch.
I also feel that Apple Music has improved a lot in these past 6-8 months, perhaps not so much in terms of app features and the likes, but I've definitely noticed changes in music availability. Most tracks and albums that I searched for half a year ago but weren't available are there now, and when I started I felt it was hit-and-miss whether the particular songs I was looking for would be there or not. Today I can't remember last time I tried to find a song but it wasn't available.
The only annoying thing now are my friends sending me Spotify links, since it means I have to look up the link, see what song/album they are linking me to, and search for it in Apple Music. This feels like something we should've solved with URNs instead of URLs...
It runs in a web browser on Linux just fine - and I find a lot of their suggested artists/tracks are closer to my tastes than I got from Spotify.
When it also has a "Discover" system that works semi-well. Why not open to the Discover screen? If I was that plugged in into the zeitgeist pop music-wise, why wouldn't I just listen to the radio?
It's more of a "shuffle-songs-from-the-same-artist-or-even-the-same-album-until-you're-annoyed-enough-to-manually-switch-songs" feature. It doesn't seem to be a proper shuffle, or even close to a randomization, no matter how many songs, artists, or albums are in your playlist.
That's the killer feature I've been waiting for...
You can, actually. Although I'll admit it's not the easiest process. You simply need to manually add your songs into your library on the desktop, create a playlist with those songs, and all your other devices will now be able to download these third party songs via the playlist as well.
I'd argue that this is a better choice than having to develop and port features to all their different platforms. By having their clients be a web view they're able to offer features / innovate quicker.
Main justification of IPO IMHO is greedy banks, early investors, and underwriters aiming to cash out a lot on the first day without giving a crap about the company or its employees in general.
It is a welcoming step and a step in right direction. Cut the middle man out.
How does one become a publicly owned/traded enterprise without an initial offering of one's shares to the public?
When you register, you have to start disclosing certain information, e.g. your financials, to the public. This is a hassle and expense most companies delay for as long as possible. Companies must register before an IPO; this is why registration and public offering are commonly conflated.
"IPO" specifically refers to the process by which an underwriting bank buys shares from the company (including, potentially, current investors) at a certain price and then sells those shares to the public at a different--hopefully higher--price [3]. Some companies cut out the underwriters by directly offering their shares to the public [4]; this is less common.
Spotify appears to be contemplating registering its shares but not issuing any new ones to the public. I presume this is to stop the bleeding from their TPG notes, which penalize them for not going public [5]. This would let existing investors more easily sell their shares. It would not raise new money for Spotify. Depending on the jurisdiction it chooses, reporting requirements may be lighter than the United States'.
[1] https://www.sec.gov/fast-answers/answersregis33htm.html
[2] https://www.sec.gov/fast-answers/answers-rule506htm.html
[3] https://en.wikipedia.org/wiki/Initial_public_offering
[4] https://en.wikipedia.org/wiki/Direct_public_offering
[5] https://www.bloomberg.com/gadfly/articles/2017-02-08/spotify...
>A reverse takeover (RTO) is a type of merger that private companies use become publicly traded without resorting to an initial public offering (IPO). Initially, the private company buys enough shares to control a publicly traded company. The private company's shareholder then uses its shares in the private company to exchange for shares in the public company. At this point, the private company has effectively become a publicly traded company. An RTO is also known as a reverse merger or a reverse IPO.
But it's perfectly possible to have some existing shareholders offer a few shares for sale instead of emitting new shares. Unconventional, and I'm sure some people disapprove of it for that reason, but perhaps the company doesn't need the cash and the existing shareholders don't want the dilution?
> “It seems short-sighted and very risky,” said Barrett Daniels, CEO and managing partner at Nextstep Advisory Services. “Don’t they want money?”
None of Spotify's competitors are trying to make a company sustainable profit from music streaming.