Back in Copper #36, we looked at the financial state of Spotify. The short story was that the number of users had grown tremendously over the preceding year, and that trend has continued: Spotify reports that as of December, 2017, the service had 159 million users. Elsewhere, they list 71 million paid users and 92 million unpaid—which adds up to 163 million, but who’s counting?
The revenue has also grown, to $5B in 2017, up 39% from 2016. At the same time, however, losses also grew, to $1.5B. Our previous piece mentioned the possibility of an IPO by the end of 2017. That didn’t happen—perhaps delayed by the disappointing financial reports—but on February 28th, the company filed a Form F-1 with the Securities and Exchange Commission, indicating the company’s intent to perform an IPO “as soon as practicable after this registration statement is declared effective.”
Companies that have never made a profit going public is far from new, as this piece indicates. It also points out that the peak of such offerings was at the peak of the dot-com bubble; might we be in the midst of another bubble?
Spotify’s IPO is unusual in that is a direct listing. Unlike most IPOs, a direct listing doesn’t sell shares before trading begins, with pre-trade values established by underwriters. In Spotify’s case, holders of existing shares are free to sell their shares at whatever price the market will bear, as soon as trading opens. Current shareholders are free to sell their shares whenever they like at or following the opening; traditional IPOs have “lock-up” agreements preventing early sales by insiders.
The company, which has recently been valued at $20B by private investors, will not issue new shares to raise capital. It will allow new investors to buy existing shares in what had been a privately-held company.
It will be interesting to see how this goes. Copper will keep a close watch on events as they occur.
An important figure in the growth of the American music industry passed away March 4th. Russ Solomon, the founder of Tower Records, was 92. Starting in Sacramento in 1960, the chain began to boom following the opening of a San Francisco store in 1968.
At its peak, the chain had nearly 200 stores in 15 countries. Tower differed from most chain record stores in that Solomon insisted that each store, being uniquely aware of local trends and preferences, would order its own inventory. In order to make that work, the stores had to hire staff who not only had encyclopedic knowledge of music, but were intimately involved in local music scenes, as well. One such salesman/expert in New York was the late audio reviewer Wes Phillips.
Those traits, allied with inventories of as many as 125,000 different records, allowed Tower to transcend the status of “just a store” and become local gathering spots for musicians and music lovers. Followers were often fervently loyal: Elton John famously went into a Tower Records store somewhere every week; actor Colin Hanks spent seven years making the documentary All Things Must Pass about the chain. Solomon was extensively interviewed for the film, and was featured in it.
Unable to compete with the download culture, Tower filed for bankruptcy in 2004, with the last store closing in 2006. In Tower’s hometown of Sacramento, the Tower Records Project works to archive and document the history of the chain–so it could be said that the history of Tower Records will outlive both the chain and its founder, Russ Solomon.