Spotify’s much-discussed public listing on the New York Stock Exchange finally arrives on Tuesday and ahead of the big event, co-founder, chairman and CEO Daniel Ek took to the company’s blog to pen a letter addressing the situation. In the post, Ek both explains the streaming service’s unusual decision to forgo a splashy IPO in favor of a more muted direct listing and lays out his vision for the company’s future.
In the post, simply titled “Tomorrow,” Ek writes that he’s proud of what the company has accomplished since its debut in October 2008 — it launched in the United States just under three years later, in July 2011 — and opens his note by acknowledging the “thousands of Spotify employees around the globe who helped build out the Spotify ecosystem while staying true to who we are and what we believe.” He then acknowledged that despite the hype surrounding its first day as a public company, it’s just the beginning of what he sees as a new chapter in the company’s history.
“[W]hat’s even more important to me is that tomorrow does not become the most important day for Spotify,” he writes. “It’s the day after, and the following day that matters — and all those days to come. Because that’s when we will continue the hard and important work of our mission: To unlock the potential of human creativity — by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.”
That, of course, is a bit of an oversimplification of what Spotify does. But broadly speaking he’s got a point: in 2017, the U.S. recorded-music industry posted 16.5 percent growth year-over-year to its highest revenue mark in a decade ($8.7 billion), with revenue from streaming accounting for an eye-popping 65 percent of that total, or $5.66 billion, itself up 43 percent over 2016. (Global revenue numbers, in the form of the 2017 year-end report from the IFPI, are expected to be released this month.)
Spotify, the global market leader with 71 million paid subscribers and 159 million monthly active users worldwide, does not break out its subscriber or listener numbers by country or region, though sources told Billboard in February that the company ended 2017 with approximately 19 million U.S. subscribers. But it’s no doubt driving much of that growth through its paid streaming tier, which it expects to grow by between 26-32 percent in 2018, according to figures the company released last week.
Yet Spotify has struggled to make a profit and strong surges by competitors with deep pockets and plenty of runway like Apple Music and Amazon Music, as well as a $1.6 billion copyright lawsuit hanging over its head, have raised some concerns from potential investors about the company, which is valued around $19 billion. Ek, however, seems unconcerned, and with the current fluctuations in the market — Bloomberg reported just this afternoon that the stock market is having its worst second quarter since the onset of the Great Depression — a more conservative direct listing could end up being a wise decision in the long run.
In his blog post, Ek writes that the company is not raising capital and that “employees have been free to buy and sell our stock for years,” meaning tomorrow’s direct listing that will turn Spotify into a public company will not fundamentally change how it operates.
“Normally, companies ring bells,” Ek writes. “Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. As I mentioned during our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.”
Since news of its plans to go public were confirmed earlier this year, Spotify has remained firmly rooted in the public eye with high-profile music-video premieres from Taylor Swift and The Weeknd, new partnerships with 8tracks and Cadillac and a double-debut with the launch of its service in South Africa and Israel. Along the way, sources tell Billboard, shares of the company have risen to around $125 apiece in private trading, which could tempt the major record labels — each of which own around 5 percent of Spotify — to sell their stock and secure what could add up to a $1 billion windfall.
But that remains to be seen, and Ek says that he’s prepared for the roller coaster ride that comes with a more high-profile existence.
“Nothing ever happens in a straight line — the past 10 years have certainly taught me that,” he writes. “My job is to ensure that we keep our foot on the pedal during the ups, so that we don’t become complacent, and that we continue to stay the course with a firm grip on the wheel during the downs. We have a lot to do — we are only in the second inning — and I’m more excited than ever for the future.”
Read the full blog post here.