Four months into the streaming service’s life as a public company, Wall Street is cheering its possibilities, while the music industry watches its next moves warily.
On July 26, Spotify revealed its second-quarter earnings, reporting its first full quarter as a public company since its April 3 debut on the New York Stock Exchange. The results -- 83 million global subscribers, up 40 percent year over year, and 180 million monthly active users -- sent its stock price soaring to a record high, ending the day at $196.28, as investors rewarded the company for growing its subscribers by 8 million.
In its short tenure as a public company, Spotify has done remarkably well on Wall Street, as its valuation ballooned to as high as $34 billion. Its relationships in the music industry, on the other hand, have soured. Missteps surrounding the company’s hateful-conduct initiative in May raised concerns about censorship from artists and executives, for example, resulting in the policy being rescinded three weeks later. And while Wall Street was encouraged by its earnings, the company’s losses doubled year over year to $461 million, causing Spotify to seek ways to reduce its content costs.
In June, Billboard reported that Spotify had quietly been negotiating licensing deals directly with managers and independent artists, which had record company executives privately discussing how they could fight back. Those deals, according to one manager who has reviewed several offers, are similar for both rising and established acts, and ask for a multiyear licensing agreement -- which auto-renews unless the artist opts out -- and a lower royalty payout from which, by sidestepping the labels, an artist would see a larger percentage. In exchange, Spotify offers dedicated marketing and promotional assistance, but no financial or editorial commitments, though offers for some superstar acts vary.