Spotify Is Moving Ever Closer to an IPO but What Does This Mean for Music Streaming?

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Spotify’s latest hire is a massive hint that after long speculation the streaming company is getting ever closer to an IPO later this year.

For those of you who are asking what an IPO is. Well, an Initial Public Offering or IPO is the first sale of stock by a private company to the public.

The company has hired Paul Vogel as their very first head of investor relations, which is a move the company would not make unless they had plans to have someone who will communicate to investors and shareholders when they’re a public company.

Paul Vogel is a wall street veteran who has recently worked at Barclays in their media and internet research. Vogel will be working under Spotify’s current CFO Barry McCarthy.

MacCarthy’s addition to Spotify was the first big hint that the music subscription service was moving towards an IPO. Formerly, McCarthy was CFO at Netflix, where he oversaw the streaming company go public back in 2002.

None of this comes as a surprise. With many of the big music streaming companies looking at ways to make additional income or increase revenue. Some of these ways have been, by adding more paid options for subscribers, selling their own albums as a record label or attempting to boast advertising sales by selling to bigger brands.

Music streaming is the future, but currently it’s an unprofitable one for music streaming services.

A report back in 2014, from industry analyst firm Generator Research, now called Nakono, stated that unless music streaming services change they will never make a profit.

“We cannot see any conceivable market scenario where the music industry would buy any of these players, let alone the whole sector” said Andrew Sheehey, co-founder and chief analyst. “Music subscription services are all losing money, and that is going to remain the case until they find a way to monetize a Worldwide user base.” The report continued to say.

So why is this? How can these massive music streaming companies, with millions of users be struggling?

This can be mostly put down to the large margin of profit record labels squeeze from these streaming companies, as well as the flawed royalty structure in place. Labels can take as much as 70% of royalties from streaming services, as well as huge upfront costs and ownership shares.

No wonder streaming companies are looking for additional channels to bring in a profit.

Find What You Like allows you to link your Spotify, Deezer, Soundcloud, and Youtube accounts. Join the Find What You Like community for FREE to search, create and listen to your favourite music together on your music streaming provider of choice.

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