By Stephen Nellis and Nivedita Bhattacharjee
Music streaming service Spotify on Wednesday filed for a direct listing of its shares, laying out financial data for the first time that cheered some analysts but led others to question how it could turn a profit from its growing subscriber base.
Spotify, which wants to trade as SPOT on the New York Stock Exchange, is taking an unusual path to the U.S. public markets, with a direct listing that will let investors and employees sell shares without the company raising new capital or hiring a Wall Street bank or broker to underwrite the offering.
Because the company will not issue any new shares, it did not specify a listing price. Based on private transactions, it is valued at roughly $19 billion, according to Reuters calculations.
Spotify, launched in 2008 and available in more than 60 countries, is the biggest music streaming company in the world and counts services from Apple Inc, Amazon.com Inc and Alphabet Inc’s Google as its main rivals.
RISING SALES, COSTS IN CHECK
In the filing, Spotify laid out detailed financial data for the first time, showing rising revenue and relatively steady operating costs, which analysts took as a positive.
Revenue rose 39 percent to 4.09 billion euros ($4.99 billion) in 2017, from 2.95 billion euros a year earlier. Its operating loss widened to 378 million euros in 2017 from 349 million euros.
Its net loss ballooned 129 percent in 2017, driven mostly by financing costs related to a 2016 deal in which Sweden-based Spotify raised $1 billion in debt that would convert to shares upon an initial public offering.
“The revenue continues to grow but in particular their costs are growing slower than revenue, which is exactly what you expect in a business like this,” said Jay Ritter, an expert in initial public offerings and professor at the University of Florida.
Spotify compared its aspirations to the reach of Facebook <FB.O> and YouTube. “We believe the universality of music gives us the opportunity to reach many of the over 3.6 billion internet users globally,” it said.
With 71 million premium subscribers globally, Spotify has about twice as many paying customers as music streaming runner up Apple, with 36 million. Including those who listen to advertising-supported streams, Spotify has about 159 million monthly average users.
Amazon Music Unlimited has 16 million paying subscribers, and Pandora Media Inc has 5.48 million total subscribers.
Google has not said how many subscribers it has to Google Play, its music streaming service.
Spotify’s premium subscription costs $9.99 a month, but it said it saw great potential in its ad-supported service, which Apple does not offer.
“With our ad-supported service, we believe there is a large opportunity to grow users and gain market share from traditional terrestrial radio,” Spotify said.
The net proportion of subscribers who left Spotify’s paid-for service, or churn, fell to 5.1 percent of paying customers at the end of 2017, from 6.9 percent at the start of 2016, the company said.
“This has been a question we’ve been wondering for a long time: how sustainable is Spotify’s model? This is the very first time we’re seeing public disclosure about churn, and the news there is really good,” said Larry Miller, head of the music business program at New York University’s Steinhardt School.
Spotify calculated that customers brought in 3.6 times more revenue over their life as a user than the company spent on marketing to attract them, as of the end of 2017, helping boost free cash flow to 109 million euros by the end of last year.
Still, in going head to head against Apple, Amazon and others, Spotify is “competing against companies that never need to make a dime on music as a standalone business and that in fact use it to drive other aspects of their business,” Miller said.
Apple and Alphabet also control the two main operating systems used by smartphones, iOS and Android. They and Amazon are all developing computer assistants, such as Amazon’s Alexa and Apple’s Siri, that could give the bigger companies advantages.
“Many of our competitors enjoy competitive advantages such as greater name recognition, legacy operating histories, and larger marketing budgets, as well as greater financial, technical, human, and other resources,” Spotify said in its filing.
Apple has launched massive marketing campaigns around its service and added subscribers rapidly in the last three years. “I don’t think there’s any doubt that the pace of competition this year has quickened,” Miller said.
Spotify has a powerful ally, in the music arm of China’s Tencent Holdings Ltd. The companies in December said they would buy minority stakes in each other, helping increase exposure to each other’s core markets.
STOCK COULD BE VOLATILE
A direct listing does not dilute ownership, as would happen with a conventional initial public offering, and saves hundreds of millions of dollars in underwriting fees. But it also frees existing owners from any lockup period restricting them from selling their shares following the listing.
Underwriters that provide price stability for new listings are not used in a direct listing, which could mean a volatile start for Spotify shares in public.
Shares trade privately in a wide band. Spotify is valued between $16.8 billion and $22.6 billion, based on recent ordinary share prices between $95 and $127.50 in the private markets in February and 177 million shares estimated outstanding by the end of February, according to its filing.
Synovus Trust portfolio manager Dan Morgan described Spotify as “interesting,” but questioned how quickly it might become profitable.
“How can Spotify monetize its user base beyond a $5-$15 monthly subscription fee?,” Morgan asked.
Pickledelphia Rescheduled for October, See You There
Shit weather put Philly’s first-ever pickle festival in, well, a pickle. The rain washed away plans for the food fest to take place earlier this month, but a new day has been chosen: Sunday, October 14.
The festival will still go down at The Piazza at Schmidt’s Commons when it unites pickle lovers this fall.
In case this is the first time you’re hearing about Pickledelphia, here’s what to expect: More than a dozen food vendors, plus 15 pickle companies, who’ll be selling themed edibles such as pickle-flavored ice cream, pickle creme brûlée, and pickle pizza.
Pickledelphia even partnered with Jameson for a pickle back bar. Yeah, they’re not fucking around. Pickle Bloody Mary’s. Pickle margaritas. This is not a drill.
Better than the Weekend will have a tent set up with some giveaways, so be sure to say hi.
Information on the event, presented by Studio 27 Print & Design and Digital Force Agency, can be found by visiting their website: phillypicklefest.com.
Inside Performix House: The Gym That’s Harder to Get In than an Ivy League School
Welcome to Performix House — if they’ll let you in. This is New York’s latest elite fitness establishment and it’s where the most driven, fit, influential, able-bodied minds unite to achieve the ultimate Instagram-worthy body. With a 13 percent acceptance rate, it’s easier to get accepted to an Ivy League university such as Cornell.
The fitness incubator is an extension of Performix, a sports performance supplement brand available for sale in GNC and The Vitamin Shoppe.
The lowest tier of membership begins at $249 per month, which does not include independent gym access: members must have a scheduled personal training session with one of Performix House’s trainers to use the fitness facility. For $899 each month, members enjoy the luxury of unlimited access to Performix House’s premium amenities, including massages and cryotherapy.
One month of top-tier membership could allow someone to work out at Planet Fitness for seven-and-a-half years. It would even cost less to lease a 2018 Maserati than it would to be a member at Performix House.
Their personal trainers, who they refer to as collaborators instead of employees, have access to Performix House’s professional video production team to create the best fitness content. videographer and editor to create content. “We’re helping them connect with their consumers and grow their following,” says Hesse.
Devon Levesque is among their training collaborators. He has more than 80,000 Instagram followers.
The dude is a beast.
Matt Hesse, founder and CEO of Performix House, accepted about 230 members out of roughly 1800 applicants.
Hesse told Forbes membership isn’t unobtainable. He wants to bring together a community of driven individuals. Each applicant is given the opportunity to answer one testing question: What do you do to own every day?
After hearing that, my new goal is to work out at Performix House.
Scranton Artists: Here’s Why We Need Art
Some jackasses, a.k.a. policy-makers and school boards, just don’t seem to f#&%ing get the importance of art enough to secure its funding and need to have its influence spelled out.
The Electric City is about to get more eclectic thanks to a group of artists banding together — basically for the good of mankind — to host a series of inventive workshops placing priority on connecting the community through creative expression during one of the most politically and culturally divisive climates in modern America. Among the artists, a wine glass painter who helps looking at the emptiness following the last sip of boxed Franzia (we all drink it) a little less depressing. Another makes flashy hats — the kind you saw posh guests wear to the wedding of Prince Harry and Meghan Markle. They’re called fascinators. Then there’s a young woman who crafts dreamcatchers and alters books from their original form to turn them into something eye-catching and display-worthy. A graphic designer is even in the mix.
The workshops will initiate this fall at the new Eclectic City Studio inside Jeff D’Angelo’s Design Group HQ at 631 Prospect Ave.
Each artist will have sign-ups for their debut workshop, while displaying and selling their art, at Bogart Court, the brick alley nestled behind Lackawanna Ave., during First Friday Scranton from 5 p.m. to 9 p.m. on September 7. They’ll set up outside AOS Metals, which sells handmade jewelry and a collection of items from local handmade artists, and The Velvet Elvis, a kitschy vintage shop that looks like every crazy rich dead aunt’s estate sale. You’ll find something there that you’ll be glad wasn’t willed to your sister.
The Eclectic Studio founder, Jeff D’Angelo, will feature handmade props throughout Bogart Court — including a display in honor of The Office outside Better than the Weekend’s HQ and a Jurassic Park exhibit and photo booth inside.
Before escaping to the remote Isla Nublar from Jurassic Park — through Jeff D’Angelo’s handmade props — here’s a reminder of why we need art in all of our lives from the artists behind the Eclectic City Studio:
Melanie DiPietro, Painted Wine Glasses by Melanie
“Expression. Not everyone communicates or comprehends the same way. I am a visual person, so colors, shapes, sounds, and movement all speak to me. There’s nothing else in the world that can compare to this type of expression. What a bland place the world would be without art.”
Aubrey McClintock, A Daily Obsession
“Life is better decorated. My fascinators are meant to make people smile and are not to be taken terribly seriously. While not everyone is willing to wear a towering french fry sculpture on their head, they can still enjoy that such a thing exists and that there are people out there who will happily sport such a concoction.”
Maddesen Paige Wright , DIY Dreamcatchers & Altered Book Art
“Art gives people an outlet; a field to be uncensored and irrevocably themselves.”
Kristy Jamison, Two Tree Design Co.
“Our modern world is connected in ways that past generations could only dream of. Art helps us communicate, reflect on, and express our cultures and beliefs. Art can be a powerful, passionate tool that allows us to shout messages about politics and human rights issues across language and cultural barriers. Art — whether it’s drawing, painting, music, words or performance — can also be a meditative and healing outlet, releasing uncensored emotions in a natural and rewarding way. Art feeds our economy and enriches our lives.”
Jeff D’Angelo, Jeff D’Angelo Design Group
“Art is truly the purest form of creative expression. People can use art to make their mark on the world and, in turn, promote further growth and interaction with others.”
More information on the artists and their First Friday Scranton visit at Bogart Court can be found here.
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