Trade Review: Week Three (1/2)

"Spotify's Value Up To Tune of $4.0 Billion by Claire Atkinson"

http://www.nypost.com/p/news/business/spotify_value_up_to_tune_of_tgJNPr9R5y1rCUaXHAnYbJ

On the verge of finishing a $400 million dollar fund raising round, Spotify's market cap is nearing the four billion mark - almost double in value from last year's $2.2 billion. Recent interests from private investors to major firms like Goldman Sachs are drawing major attention to Spotify's potential to be one of the most integral, newborn businesses for the music industry. A business model based on streaming music for free, Spotify's innovative solution for music piracy and for today's generation to have unlimited access to unlimited content is changing the way we legally acquire musical content. 

With over 15 million users, Spotify creates revenue through a social media partnership with Facebook, advertising, and subscriptions. Every Spotify account must log in through Facebook, which in turns posts the user's listened to content to the social world and also advertises Spotify on Facebook. CEO and social media giant Mark Zuckerberg praised Spotify for being "a company that was making best use of the social network’s platform" (Atkinson). Additionally, advertisements on Spotify's website is a traditional form of creating revenue for any website company. However, Spotify is utilizing a new advertising approach by creating a subscription opportunity for its users to not have any advertisements during their Spotify experience in exchange for about five dollars a month. A different subscription Spotify also offers is for ten dollars a month, where users will not have any ads, offline use, and also HD sound quality for their music. The most innovative part of this deal is that you do not need to have Internet to stream the music, which allows unlimited downloads for ten dollars a month essentially. With already four million subscribers, fifteen million users in total, and already making 887 million dollars in revenue last year, what does Spotify need investors for?

With these new funds, Spotify hopes to enhance their user experience by creating a browser-based service what will change the way users will interact with Spotify and its available content. The browser service has people questioning "whether the new browser-based version will replace the traditional desktop client" (Karin). Although a new way for users to interact with Spotify and find music, some are skeptical as to how this will change the way Spotify functions because it could potentially get rid of the desktop clients and how people are used to Spotify's interface.

Also, the $400 million raised will go towards expanding Spotify geographically to tap into new markets. Already an established name in the music and social media industry, Spotify's expansion into new countries will certainly create immense cash flow. With Spotify available in only sixteen countries, imagine the revenue the company would produce once it has the funds to tap into user-ready markets. Countries like Japan will be a massive breakthrough for Spotify as it is the second largest music market in the world. Spotify continues to prove itself as an up and coming music giant and worries current music giants like Apple, with what started out as a small spot in the music industry is now growing to a big problem for music servicing companies alike. 

1.    Atkinson, Claire. "Spotify Value up to Tune of $4B." New York Post. N.p., 13 Sept. 2012. Web. 16 Sept. 2012. <http://www.nypost.com/p/news/business/spot ify_value_up_to_tune_of_ tgJNPr9R5y1rCUaXHAnYbJ>.

2.     Kinder, Lucy. "Spotify Will Launch Browser-based Version." The Telegraph. N.p., 10 Sept. 2012. Web. 16 Sept. 2012. <http://www.telegraph.co.uk/technology/new s/9532943/Spotify-will-launch-browser-based-version.html>.