Spotify to test how its music service plays on Wall Street


SAN FRANCISCO (AP) — Spotify is about to find out whether investors view its music streaming service as a budding superstar or a flash in the pan.

The Swedish company will make its stock market debut Tuesday, casting a spotlight on its early lead in music streaming — a still-evolving field trying to hook people on the idea that it’s better to subscribe for online access to millions of tunes than to buy individual albums and singles.

Spotify CEO Daniel Ek sought to manage expectations, saying he expects a bumpy road.

“I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities,” Ek said in a blog post Monday evening.

“Nothing ever happens in a straight line — the past ten years have certainly taught me that.”

Spotify has struck a chord with 71 million worldwide subscribers so far and is aiming to increase that number to as many as 96 million subscribers by the end of the year.

By comparison, Apple’s nearly 3-year-old music streaming service has 38 million subscribers. A list of other formidable competitors that includes Google and Amazon also offer similar music streaming services, raising the specter of Spotify being wiped out by far richer rivals.

Spotify’s early lead in music streaming has drawn comparisons to Netflix, which built upon its pioneering role in DVD-by-mail rentals and then video streaming to create a hugely successful, subscription-driven franchise that has produced spectacular returns for the company’s investors.

A $10,000 investment in Netflix’s 2002 initial public stock offering would now be worth more than $2.6 million, leaving some investors wondering if Spotify might be on a similar trajectory in music streaming.

“The similarities here, we believe, are much greater than the differences,” RBC Capital Markets analyst Mark Mahaney wrote in a recent research note assessing the parallels between Spotify and Netflix.

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