Tag Archives for " IPO "
As mentioned here before, Spotify’s licensing deals with the major labels is currently out of contract. This is a big deal since the company wants to go public this year, and that could be put in jeopardy if it doesn’t have its licensing house in order. But the labels are driving a hard bargain, not only financially but how their new music will be served up to users, and that could make Spotify tiers look different soon.
One of the things that’s already happening is that some of the hottest new releases will only be available on the paid tier (why did it take them so long to think of this?). Of course that’s an incentive for more people to upgrade from the free tier, but there may be something else coming soon that amplifies that strategy.
It’s been reported that the labels are pushing for the free tier to be for singles only that are past their release “window” (the amount of time after it’s been exclusive on the paid tier), and the rest of the album will only be available on the paid tier. Again, this makes total sense in that it’s another incentive to get users to pay.
Of course, should Spotify adopt that strategy, then you can be sure that the other streaming networks wouldn’t be too far behind.
It’s also been reported that the majors are pushing to up their stakes in Spotify in exchange for the new licensing agreements (yes, the majors all own a piece of Spotify), which could make them quite a bit of money when the company IPOs.
All this means that there’s a lot going on behind the scenes at Spotify and negotiations will get more intense in the coming days and weeks. The sooner this is all worked out, the sooner the company can IPO, something that the investors are pushing heavily for. This might not be the best thing for music consumers, but reconfigured Spotify tiers will be better for artists, labels and publishers in the long run.
It looks like all of those rumors about Spotify buying SoundCloud have turned into nothing more than words on paper. Word is now out that any hopes of a deal between the two companies has been squashed, although months of talks almost lead to a deal.
Why? Although it hasn’t been officially announced, Spotify is planning on a public offering in 2017, and there were fears that this particular acquisition could negatively impact the IPO. The fact that Spotify hasn’t turned a profit yet and owes loads of money is bad enough, but at least it’s generating lots of cash and growing. You can’t say the same thing for SoundCloud, however. Despite many different attempts to both gain more users and get them to pay for the premium service, that hasn’t happened, so the company’s health is definitely in question.
The other question that potential investors and underwriters had was about the synergy between the companies. For SoundCloud, the acquisition would be a life preserver. For Spotify, it would gain some potential users, and perhaps provide them with an easy path to post their music on Spotify, but it’s difficult to see how that helps Spotify enough to justify a potential billion dollar investment.
Another negative is the fact that Spotify would have to enter into another round of negotiations with record labels and publishers for new SoundCloud license agreements. These licenses are the biggest hurdle for any company either trying to get into, or already in the music distribution business, and investors know how difficult they can be. As a result, it’s a headache that Spotify can’t afford to take at the moment.
If Spotify does go public next year and is flush with cash (after paying off investors that is), look for the company to revisit the SoundCloud acquisition again. Until that time, SoundCloud has to hang on.