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Spotify Confirms April 3 Public Offering, Doubles Down on Freemium in ‘Investor Day’ Presentation

During its inaugural “Investor Day” on Thursday, Spotify confirmed reports that it will go public the week of April 2 — it will do so on April 3, to be exact, with guidance issued on March 26 — and doubled down on its controversial freemium model, which has been lambasted by many artists but the company claims to have been a vastly effective gateway to the service, with a high but unspecified conversation rate.

The long presentation — which actually took a 10-minute break after the first hour — featured cofounder and CEO Daniel Ek along with senior executives Paul Vogel, Seth Farbman and Gustav Sodorstrom dropping some key data points amid long speeches and artist-heavy videos plugging the company, its services and its future. The overall effect was like an Apple WWDC presentation crossed with a product pitch session.

Amid his familiar wide-eyed predictions about the company’s future, Ek confirmed that the service now has 71 million global subscribers, along with 3,500 employees and more than 35 million tracks — “but we’re just getting started.” He explained the company’s decision to go with an unusual public listing instead of a traditional IPO — “the traditional method just doesn’t feel right for us” — and later added that “since Spotify isn’t selling any stock, we are entirely focused on the on the long-term performance of the business,” he said. “The most important day isn’t our listing day — but the day after and the day after that.”

The executives’ talking points boiled down to three basic elements: Ubiquity, noting that it is available on all major platforms globally; Personalization, both for users to customize their experiences and for the company to collect data on users’ habits in order to improve the service; and most interestingly, Freemium.

The service’s free platform was a major reason why Taylor Swift chose to remove her music from Spotify in 2015 (before restoring it last year after some reported six-figure persuasion from the company). And while Ek conceded that “I think we could have done a better job of telling our story,” he pointed to the music industry’s 3% and 6% growth in 2015 and 2016 respectively, and noted that it was driven by streaming, and of course Spotify is the world’s largest streaming platform. “Nobody else has the global scale that we’ve already built.”

Yet it was chief product officer Gustav Sodorstrom who enumerated three major reasons behind the company’s Freemium service, which many observers agree has been a key toward converting users into subscribers.

“One: it reaches the millions of consumers who are still on the fence about paying for music, which brings them into our ecosystem. Two: It allows us to learn from the biggest possible group of music fans in the world. And three: Once they have Spotify on their phone, car speaker and devices, music simply becomes a much bigger part of their lives, and the more they engage, the more likely they are to discover that music is an important part of their life worth paying for.”

The second half of the nearly three-hour-long presentation focused on the company’s artist services, its Premium service, metrics, advertising and finance, although the details may have been lost on potential investors due to its numbing length and extensive repetition.

In a response clearly intended to counter claims that Spotify is not paying artists sufficiently, Ek said the company’s goal is to enable 1 million people to live from music. Head of artist relations Troy Carter spoke about the company’s Spotify for Artists, which helps them pinpoint their audience and its habits and which he said more than 100,000 artists per months are using. However, his claim that “Today, most of the artists’ reservations [about Spotify] have been addressed” would probably be disputed by many.

 

 

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