Kim Bayley on Spotify’s IPO

Tuesday 3rd April 2018

As Chief Executive of a trade association currently with more than 250 member companies – an all-time-high, I should  point out – I tend to avoid commenting on the activities of individual members. Experience suggests it’s a mug’s game.

Criticising members in public would definitely be ill-advised. Singling out any individual member for praise ahead of its competitors is usually inappropriate and likely to create ill-feeling. Hence my customary silence on such matters. Breaking this golden rule demands truly extraordinary circumstances

Today, April 3, 2018, and the listing of shares in Spotify is just such a circumstance. It is so extraordinary that not to comment would be downright peculiar.

I feel confident commenting because Spotify’s achievement in reaching such a milestone in fact typifies the achievements of ERA’s membership as a whole.

Once dismissed as old-fashioned, unglamorous and “mere outlets”, the digital services and retailers represented by ERA have emerged as a progressive, fast-growing, consumer-focused, risk-taking, value-creating dynamo for the whole entertainment industry.

To take Spotify as an example, the 186-page registration statement with the United States Securities & Exchange Commission for today’s share listing (see here) makes for extraordinary reading.

To take just three examples, Spotify boasts:

  1. 159m monthly active users and 71m premium subscribers in 61 countries;
  2. A compound annual growth rate of 45% since 2015;
  3. Cumulative royalty payments of more than €8bn to rights owners since launch.

What is perhaps most striking is the sheer level of entrepreneurial risk-taking it has taken to get this far.

Since its launch Spotify has incurred cumulative operating losses of €2.43bn. The declared risk factors associated with buying shares in the company – everything from the lack of control it has over content costs to computer hacking and fraud – run to more than 40 pages.

This is risk taking on a grand scale.

Rights owners justifiably pride themselves on the risks and investment they make in new content, but this is a dramatic reminder that the creators and sponsors of new digital services are also entitled to congratulate themselves.

They have revived the entire entertainment industry, they have created new and engaging ways for consumers to engage with content, they have generated billions in new revenues for content owners and in the case of Spotify – until today at least – have made not a cent out of it themselves.

So today, April 3 2018, I have no hesitation in congratulating Spotify founder Daniel Ek, the company’s 3,000 employees worldwide and its investors on today’s share listing.

But I do so on the basis that while currently the biggest music streaming service, Spotify is only the tip of an iceberg which includes a whole new generation of digital services who between them have revolutionised the entertainment business over the past decade.

While Spotify may grab the headlines today, it is reminder of the huge contribution also made by  many others, by Amazon and Google Play, by Deezer and 7digital, by Napster, Sky, Netflix, Steam and Apple.

From the Oscars to BRITs, the BAFTAs and the Grammys, the entertainment industry rightly celebrates its extraordinary content. Today is a day to celebrate the extraordinary digital services – and retailers – who bring that content to consumers.



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