Rumor on repeat: Spotify IPO

Music streaming service Spotify is again rumored to be preparing to go public.

The company has managed to maintain its market lead against competitors from some of the world's largest tech companies including Apple and Amazon, and has more paying subscribers than any other streaming service. It has started reaching out to investment banks about an IPO, but Wall Street remains uncertain about its value and the market.

Spotify was last said to be ready to IPO back in 2014, when it advertised for someone to help prepare for the move and entered into discussions with investment banks. Ultimately, however, it dropped the idea.

Spotify has a number of things in its favor: it is the market leader, has increasing income, and even though it has yet to make a profit in its 10-year history, it could easily do so if it cut back on aggressive expansion plans.

On the flipside is the fact that the company is completely reliant on the music industry, which it provides in commissions over 50 per cent of its revenues. The music industry often acts collectively and could refuse to license its music to Spotify (if, say, it decided to strike a deal with Apple) – something that would instantly kill the business.

It is very unlikely to do that, but the leverage that the music industry enjoys enables it to drive a hard bargain and so add a significant degree of uncertainty about what Spotify's real worth is. ®