Spotify raises $526M at a $8.5B valuation | Hacker News Reader

Spotify raises $526M at a $8.5B valuation

tech.eu

74 pointsrobinwauters81 comments

I had to check: I became a paying member of Spotify in 2009. That's a lot of money spent on music I never would have done if not. Before that, I had maybe bought 2-3 albums in my entire life, growing up when piracy was at its peak.

At the same time, I think it's weird raising this kind of money so late in the lifetime of the company?

It's funny because I think the other way. All the money Spotify has saved me because I used to buy albums all the time. I wonder how it balances out overall. I imagine it works out the same but a wider variety of bands now make the money.

Isn't everything available on youtube for free these days? Or radio etc. I can't imagine paying for music. Unless it's an extremely rare CD I can't find anywhere else.

I pay Spotify for usability and UX. Google Music might be couple of euros cheaper but the UI is worse (especially on mobile). Piracy and saving files to different devices takes time and effort, streaming is easy. Hunting down good quality uploads and creating playlists based on albums on Youtube? No way.

I had to use Google Music as the wifi at my old work, which was supplied by the local uni, had blocked Spotify.

This means I'm pretty invested in it right now, but god damn they just totally fucked up the desktop interface too with a material redesign. Everytime you open it, you have to click the burger icon just to see the menu. You can no longer view your present playlist in a permanent window, only in a popup. I add a lot of artists to my thumbs up playlist on a whim and then listen to it on shuffle, so like to see what I just listened to/is coming up. And now it's loads of clicking instead of an alt-tab. All the artist photos are now inexplicably circles making it hard to distinguish them by scanning.

Google cannot design anything. They keep getting worse, even as they employ designers. Everything they touch recently they make the UX worse in their quest to turn everything into a tablet interface, aka material.

I would agree with this. I have a Samsung tablet from last year (yes, an entire 6 months ago) and in that time Google has introduced the hamburger menu everywhere, and the "swipe from the left" navigation item.

The physical menu button on the device DOES NOTHING in these apps. It's stupid - why not map menu to the hamburger menu? Or are they confused about whether menu should open the hamburger or the side navigation?

When I bought my TMobile G1 (yes, classic eh) it had menu, home, and back. Then, they introduced a "search" button on the HTC Desire and it lasted until the Motorola Atrix I had. Yet in that time, it stopped doing anything in certain apps.

After that, they completely binned it.

Now the buttons are being made even more redundant. I wish they would make their mind up and not rewrite the UI guidelines every Google I/O. It's STUPID.

I think this Samsung is the last Google device I will buy - now that iOS does split screen, I may jump ship (but I will miss this stylus). At least things run smoothly (Google Maps in 3D on a Samsung quad core is jerky and SLOW; it's worse on the 8 core).

Google hasn't been using the menu button for many generations. It went away with the Galaxy Nexus, and since that you've had the Nexus 4, Nexus 5 and Nexus 6. Seeing that they release one per year, that's 4 years ago.

Blame Samsung for still keeping a button layout that doesn't apply to android since the original 4.0 came out.

Very informative, thanks! In that case I will direct my rage at Samsung for including it, but also at lazy app developers who fail to map MENU PHYSICAL BUTTON to the hamburger menu.

Last Samsung I buy I think.

I think a lot depends on what your income level is. If you have any interest in music, having a well curated music service is trivially worth $10/month, particularly to avoid the hassle of trying to track down good tracks of what you are interested in, deal with ads, etc...

And, the good news is that as paid-for-streaming starts to take off, it creates an ongoing revenue model for artists, ensuring that the labels/artists have incentives to create great new music.

And, between Pandora, Spotify, Tidal, Beats/Apple Music, Rhapsody, Rdio, google Music, Apple Radio Stations, Beats 1, iheartradio (ironically, my favorite) - lots of competition.

For some people curation and editorial responsibility is considered a valuable feature. Time spent hunting for freebies is time I could spend otherwise - i.e. saving me time to find the thing I want is something that provides me value that I am willing to pay for.

Radio doesn't have options, and has ads (as does youtube but I can block them). I can't play youtube efficiently and safely while driving, and it's a much higher drain on battery life and bandwidth. My main use case for spotify is driving music, followed by curated playlists while coding or gaming

If you are willing to put up with the ads.

The sound quality on youtube is really bad, the UI is worse and you waste bandwidth on video. It's also missing features such as shuffle play and defining what is in the upcoming queue. It is also a stand alone application so it you don't need to run your web browser.

Spotify has helped me find new music that I don't think I would have found through my 'normal' channels. And it has resulted in the purchase of a couple of albums too.

At a $120/year for 6 years, you've basically spent $720. That is amazing. I, on the other, have spent $0 on all music in my entire life (excluding concerts).

The sad thing is that those $720 have provided no lasting value for the user; had it been spent on albums it would have been enough for 50-ish CDs that will last "forever" (at least if you rip them). Or 720 individual songs.

That wouldn't have given access to as diverse music as Spotify does, of course. But on average, how diverse is the music taste of random people?

> The sad thing is that those $720 have provided no lasting value for the user

I don't necessarily see this as sad. I spend money on lots of things that have no lasting value (beyond memories), many of which are experiences. I think we over-estimate how much time we have in ours lives anyway to enjoy these "permanent" things (like CDs).

And not only time but mental and physical space as well.

This here! For 10 bucks a month I know I never have to worry about syncing music, whether something is available, etc.

How will you satisfy your desire to hoard crap and fill your house up with ever-increasingly dusty CDs?

How will you read the sleeve notes and who did a rubbish job of mastering and mixing this album?

God this spoke to me.

I'm in the midst of cleaning out our basement filled with old cassettes, VHS' and CDs. My siblings who moved out years ago, asked me to donate them or throw them away. So now I've got to spend hours sifting through piles of media to figure out what to do with them.

It's such a hassle. (Yes, First World Problem)

My parents as Costco users have this belief where having physical things, especially in bulk, is a key strategy in savings. They hate subscription models especially for digital formats. But what they fail to acknowledge is space is valuable too. The space lost around the house because of their buying habits and unwillingness to let things go (items that were bought on sale but never used, old clothes, magazines, books, media, etc.) is pretty sad.

I used to keep loads of DVDs etc. but after getting rid of lots of them, the house feels emptier and less cluttered (kind of like a clear desktop, no?)

My parents have the problem of hoarding things and they refuse to sort anything out, so it'll be a MASSIVE pain if/when anything happens to them and I have to sort it out. I will need to just have a bonfire or burn the house down or something.

Given my tendency to accumulate useless crap and no emotional bond to the physical media that stores that music - for me the physical discs would be logistics and interior decorational problem rather than any thing of value.

I'm paying spotify to provide me a service to access music. Now I don't need to hoard it and waste my OCD on endlessly minding 'my' collection.

For me the lack of any physical items or files that I would need to administrate is a win.

...Until you notice that some licensing deal has ended and some albums you love have been pulled of the service. It happens.

I don't care for physical media either but I buy everything I like as digital lossless audio. Not owning my music wouldn't work for me. Not that it has to be like this for everyone, it's just something to be aware of.

50ish CDs of which at least half you bought because you liked the first single and find out the album is not very good, so they just sit there.

Spotify fills my use case almost perfectly.

I see this exactly the other way around: paying for a service like Spotify allows me to experience almost any music I want to, and discover much more, at any time and place I desire without having heaps of plastic discs collecting dust in my home.

For me the lasting value of experiencing music in an efficient and uncluttered way far outweighs that of physical media.

Unlike these folks I grew up in the age of cassettes and CDs and have spent a small fortune on music. The past 4/5 years have been just Spotify and I don't miss CDs one bit. The fun of reading thru the album art is cool for a minute or so, but flimsy scratchable CDs are a terrible medium for music.

As at least one study and plenty of anecdata has shown, music helps a lot of people with their work performance. The ROI on that $10/mo should be pretty good for your average developer. Spotify radio and playlists make easy to discover new music or listen to music you like without spending any time curating playlists etc.

If you think of the time spent to find and buy 720 songs, at just one minute each, that's 12 hours spent just buying songs. The value of spotify is wasting no time or money on acquiring or managing a music library.

Why should it provide lasting value? He's paying for a service.

Personally what I feel like I'm paying for is access to music in such a way that I no longer have to make album purchasing decisions. All the music is just there for me when I happen to feel like listen to it, as long as I keep paying monthly of course.

I think the sibling comments are showing that if you want to have the inconvenience of binding your music to physical artefacts, you might as well buy records, which have nicer sleeves. Then you can continue to listen to the music on Spotify, apart from those special occasions when you bring out the record and listen specifically to it.

Compared to the thousands of songs he'll most likely regularly listen to (I do) it's still cheaper - especiall when your music interest shifts. Not to mention being able to just listen to whatever without having to spend any extra

He can still get those for an extra $0. What you're really getting for your money is convenience and integration.

I pay the same amount for useless snacks. They provide no lasting benefit except a few extra calories when needed.

People have different budgets but 120$ a year is not so much to pay for a thing that provides some noticeable value for me.

Spotify is a similar service that provides me something I want at a moments notice.

You're listening to music available for free or...?

(Assuming you're listening to music at all because otherwise why go to concerts...)

I'm in the same boat (not $0, but certainly in the tens of dollars, not more) and for me it is the "or". That is pirated music. Nowadays I either listen to youtube playlists (with ads) or something like Spotify (with ads). So in a way I pay, but just with my time, not money (unless the ads work).

The stock market is out of steam, it hasn't budged since QE ended, and won't go any higher unless the Fed restarts QE or GDP growth jumps a lot higher.

That's going to start to have a negative effect on exit opportunities for tech companies, and will begin to sooner than later squeeze valuations.

This is a window of opportunity for Spotify to grab a massive amount of capital at a rich valuation (Pandora is worth $3.6 billion). How much longer is the easy money party going to last? Who knows, it's just preferable to not bet on it lasting a lot longer. At this point, start-ups should be looking out six months max on the easy money, and not assuming it's going to be around any longer than that.

I think this is Spotify's 'we have decided to not try to IPO near term' money.

Just because piracy was at its peak didn't mean you had to join in... :-)

I have hundreds of CDs that I bought. I think I single-handedly kept the music industry alive.

It's a pity when your tastes change though (and you find you can't sell any of them, other than obscure guitar music which I still like)

If you like good, somewhat hard to find guitar, try to pick up George van Epps' "Mellow Guitar."

Thanks for the suggestion, I will look into George van Eps. I have always been into rockier stuff (think Satriani, Vai, Johnson) and blues stuff but have recently been getting into some fusion stuff (Niacin, Planet X etc.) so thanks!

>> "At the same time, I think it's weird raising this kind of money so late in the lifetime of the company?"

They need it to survive as their losses are continuing to grow.

Not really. Spotify is partly owned by the labels[0], so you have to think of it like Hollywood accounting. It makes sense for them never to make a profit, because as long as they let the labels extract money from them in terms of licensing, they fulfill their purpose.

It's like how so many blockbuster movies make a "loss" on paper to avoid paying taxes on their revenues which they end up distributing to all the people who are involved with the movie.

[0] http://www.swedishwire.com/jobs/680-record-labels-part-owner...

Do you have a source for this?

"However, Spotify recorded an operating loss of €165.1m (£119m) in 2014 compared to €91.2m (£65.7m) in 2013, while its net loss nearly trebled from €55.9m (£40.3m) in 2013 to €162.3m (£117m) in 2014."

http://www.theguardian.com/technology/2015/may/11/spotify-fi...

I fail to see how these companies will ever turn a profit. I can't imagine their market growing exponentially bigger than it already is.

I'm an entrepreneur in the non tech domain, and profitability is the first thing we look for, not the last. Somehow, tech companies manage to survive for years without making any profits, which is weird t me

They only have 15m paying customers, so if it was a matter of scaling there is a long way to go. Of course they may not be profitable at any scale due to the pricing model of the labels, but thats a different matter.

Expecting Spotify to make a profit is like expecting a blockbuster movie to generate a profit. Show business isn't normal business.

Don't blockbuster movies make dozens of millions on a regular basis?!

http://en.wikipedia.org/wiki/Hollywood_accounting

> According to Lucasfilm, Return of the Jedi, despite having earned $475 million at the box office against a budget of $32.5 million, "has never gone into profit".

..because they're redefining profit "creatively".

It makes sense. Apple entered the music streaming market with introducing Apple Music at WWDC. Spotify needs the funds to compete against a now even more competitive market.

I'm 100% going to give Apple Music a good try during their three month free trial period. I've been loyal to Spotify since they opened to U.S. customers and I left from Rhapsody, but Apple Music will have better integration into the iPhone, will hopefully have more selection (we'll see during the trial), and is cheaper for my household because we use three account, costing us $20.00 / month. Apple Music will cost $15 per month and I can use up to 6 accounts if I want to.

That's obviously true, but a round of this size was likely several months in the making even for a company the size of Spotify.

So was knowledge of Apple's announcement.

I notice in the article that Coca Cola is an investor. Anyone care to explain why Coca Cola would make such an investment? I assume it's because they're sitting on a bunch of extra cash; but wouldn't it be more efficient to distribute that cash to their shareholders?

I have a few more details on it (I wrote the linked article)

Coca Cola invested $10M back in 2012 as part of a $100M round.

I know that before they invested, Coke and Spotify had an existing partnership including integrating Spotify into Coke’s music websites and Facebook page.

At the time, the Director of Global Entertainment at Coke said:

“Music has always been a huge part of Coke, I think since 2008 or 2009, you've seen us ramp up from the global perspective, and I think Spotify is the next evolution of Coca-Cola music. It's going to be interesting to see how Spotify accelerates our global music strategy, and how the brand can facilitate that conversation where people discover music and share it amongst each other.” (from an article on AdWeek)

"Music has always been a huge part of Coke"

This is strange. I thought it was just syrup and bubbles that was a huge part of Coke.

like that apple device is just a computer?

It certainly has no bubbles in it!

Lol the post reads as such a joke.

"X has been part of Y since inception, we've always had our eyes on broadening the scope of Y to the X-generation. We want to really expand upon our base and help X seek Y in new ways. Thanks, Mike"

They have at various times done music promotions and own label streaming services and deals with Spotify.[1]

[1] http://www.coca-colacompany.com/coca-cola-music/every-song-h...

Big companies often establish hedge funds to invest all their excess money.

Example: http://www.businessinsider.com/apple-owns-the-worlds-largest...

I'm going to give Apple Music a serious try. I've been using Spotify since the very beginning, but I find that music discovery and UX in Spotify are a mess, and for some reason I end listening the same music all the time. I've got the feeling that Apple is going to get discovery right. Time will tell.

I hope so too. I, too, have been a paying Spotify user for a long time and it just drives me crazy. I tried Rdio too but wasn't a fan. All music catalogs being equal, the bar is set pretty low at the moment. I really want to like Spotify too, because they seem like they're trying hard, but the UI and UX just feel terrible to me.

I've used Spotify since 2008. The recent UI change really ruining the experience. I believe they are using Chromium now.

Spotify uses 1GB of ram, and every 10 seconds the CPU usage spikes to max. The UI is so unresponsive, Firefox is more responsive while restoring a session of 100 tabs.

I no longer pay for Spotify. The free version is litterd with malware ads, on par with SourceForge.

They've also remvoed 70% of it's original features.

The UX of Spotify has been regressing since 2011.

I have never used Spotify but am I right that a music streaming app uses 1GB of RAM and spikes the CPU???????

I thought iTunes and RealPlayer were bad but this is incomprehensible.

After downgrading to version 0.9.7.x, all UI/UX problems I had are gone. I'm pretty satisfied with their old client.

I've been thinking, that services like spotify could give users way to script their own music discovery. Fiddle with different properties to discover random music or very specific genres. Ability to exclude popular artists, etc.

I use Google Play music and have found the discovery algorithms to be astonishingly good. My music taste is very specific and covers only two or three genres, and within those genres I get suggestions that I love perhaps 90% of the time.

Why do you think the software is to blame for your decision to listen to the same music all the time?

Blame is an irrelevant concept here. Spotify isn't making them happy, so they are going to try something else.

case and point

This is great news for Spotify, but a bit frustrating for me and I am sure plenty of others as individual investors.

So many great companies I am passionate about are just too hard to invest in before they go public. And you're in way too late at IPO stage.

I keenly start following these types of companies a lot earlier than most of the general public, and I can bet I'm much more emotionally invested into seeing them succeed than a broker in a 100 story building ever will be. I understand their business models and want to give them money to help them grow.

SpaceX is one example - all the investment banks have first rights on new issues and even waving a respectable amount at them doesn't help. And it's too difficult to get a feel for whether you are getting a "fair deal" on second market so to me it's not really a viable option even though the service is good in theory.

Awesome, and frustrating, at the same time!

>SpaceX is one example - all the investment banks have first rights on new issues and even waving a respectable amount at them doesn't help. And it's too difficult to get a feel for whether you are getting a "fair deal" on second market so to me it's not really a viable option even though the service is good in theory. Awesome, and frustrating, at the same time!

Elon addressed this in the shareholder meeting today/yesterday. https://www.youtube.com/watch?v=Q60FOIV6Ew8

It's close to the end, during the Q&A.

It will be interesting to see how Apple Music affects them. If you listen to a lot of new music, the cost of switching music services is pretty trivial (moving from Rhapsody to Rdio to Spotify has been a minimal hassle for me), and being able to call up any album with Siri is a powerful advantage. Fair or not, this is why Apple could report a vast advantage in map requests over the superior Google Maps.

I like Spotify a lot, but they look to have a weaker defensive position than Dropbox or Netflix to me. With minimal switching costs (search is the main interface even if you build up something of a "library") and undifferentiated content, it's really a commodity service.

I've built a large list of artists that I follow in Spotify (so that I get notifications when they release new music), and an even larger list of albums saved to my library so that I can easily browse through music that I like. It seems like it would be a bit of a pain to switch to another provider, but I imagine it would still only take me an hour or two to setup all my follows and saves in another app.

I'm eager to try out Apple Music once it comes to Android.

I use Spotify Free, i.e. with ads and what I find interesting that most (paid) ads are from Universal Music. So they pay for ads so you listen to their content (targets are playlist with crap pop music). Weird.

When Spotify's contract with Sony Music leaked, it emerged that, as well as granting Sony a credit for advertising inventory (i.e. free ad impressions), Spotify must "offer a portion of its available unsold ad inventory to Sony Music for free to allow the label to promote its own artists."[1]

It's not unreasonable to assume that other labels (like Universal) have a similar deal, so those adverts you're seeing may well be unsold ad inventory that has been given to Universal to promote their own artists.

So, I'd question your assumption that Universal is paying for those ads.

1: http://www.theverge.com/2015/5/19/8621581/sony-music-spotify...

I see, that makes more sense, haven't heard about it before.

They get X million(?) dollars per year of ad spend from Spotify as part of giving Spotify access to their music library.

They could of course resell the ad space to external advertisers but may prefer to increase the exposure of their artists.

You'll never see Google Play Music or Apple Music trying to raise money like this.

Yay Spotify!

Reply on news.ycombinator.com