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Spotify sales near $900 million, but reach comes before return

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Spotify could take a big fifth investment to reach a $4 billion valuation, even though it doesn’t need to and doesn’t want to exit through the stock market, CEO Daniel Ek says.

Here are highlights on its progress from Ek’s Friday interview with Swedish newspaper Dagens Industri:

  • 2011 revenue grew 160 percent to SEK 1.69 billion ($250 million), DI says.
  • But losses grew from SEK 253 million to SEK 402 million ($59 million), DI says. “Those numbers sound reasonable,” Ek confirmed.
  • “It is not unlikely that, already this year, we have a turnover of more than SEK 6 billion ($887 million),” he added.
  • The question of when we’ll show a profit actually feels irrelevant. Our focus is entirely on growth. It is priority one, two, three, four and five.”

Spotify is busy signing up users in new countries around the world, front-loading required investment before what it hopes will become a lucrative and dependable subscription business.

In 2011, it raised a big $100 million, its fourth round, for its globalisation ambitions from DST, Kleiner Perkins and Accel, valuing it at $1 billion. Now recent reports suggest the company could seek to raise an additional $200 million or so, valuing it at up to $4 billion.

At those levels, we would definitely be interested in talking,” Ek tells DI. “We have no need of more capital in the current situation in order to operate the business plan we have.

“But I have learned to always take the money when you do not need the money. If an investor can add strategic value and the valuation is good, we are interested.”

Such a lofty valuation would tend to suggest only the stock market could provide the exit Spotify investors will eventually seek. But Ek tells DI “the stock exchange is not an option for us”.

That may be a stock response, too – of course Ek would say he wants to build the company for the long-term; no exit in sight.

Problem is, if Ek really wants to eschew going public, then a $4 billion valuation narrows the private exit opportunities for Spotify’s investors to a small pool of Facebooks, Googles and Apples. But, in a world where Facebook can pay $1 billion for Instagram with no business model, let alone no profit, that’s not necessarily so crazy.

2 Responses to “Spotify sales near $900 million, but reach comes before return”

  1. Eventually they will run out of new markets to tap and will have to justify the business based on their subscription levels and/or ad revenue. What would be interesting to know would be the renewal % of existing subscribers; how long does a subscriber remain a subscriber; differences in these based on geography. This same info for users on the “free” service would also help prove the eventual viability of the service.

  2. “The question of when we’ll show a profit actually feels irrelevant. Our focus is entirely on growth.”: What a luxury Mr. Ek, you don’t have to have a successful model like every other business in the universe. Ponzi schemes are based on growth too. Your garbage company wouldn’t exist without the copyright owners you’re feeding off/ripping off, and your idiotic “model” – like many created by IT companies and shoved at the music industry – doesn’t work. Of course you’ll be long retired to an island retreat before the millions you affect have to pick up the pieces. Subscription services are immoral, we can do without music being bought and sold by the yard, and dished up by soulless tech-heads…