INTRODUCTION

Founded in 2006, Spotify wasn’t the first music streaming service ever created. Some readers might remember the days of Napster and Kazaa. Apple also launched its iTunes store around the same time, where you could buy songs for $0.99. Music has always been a significant aspect of the internet, but it has also faced a litany of legal challenges.

Let’s fast forward to 2018, which is when Spotify when public after 12 years in operation. By this point, music streaming had completely taken over the music industry, and all the major players wanted a piece. Apple had Apple Music, Google had Google Play, which became Youtube Music, and Amazon had Amazon Music. This led to a revolution in access to music like we have never seen before.

QUESTION 1 : Assess the current economic and market climate. Assess the music streaming industry. How is Spotify disrupting the industry? What are some of the key success industry factors?

In Summary:

• The market is changing from purchasing a whole album in form of vinyl, cassette, cd to streaming
• Spotify bring a new way to consume music media at the palm of your hand
• Spotify has a leading technology that creates a network effect

QUESTION 2 : Evaluate Spotify’s past financial performance. What are some of the takeaways from your analysis?

In summary:

• Spotify still unprofitable however able to improve its Revenue & Expense after its IPO
• Despite unprofitable, and low runway the equity of spotify growing at shocking rate
• The key financial ratio shows improving signs and it’s quite likely spotify could reach profitability soon.

QUESTION 3 : What are the differences between a traditional listing and the direct listing being pursued by Spotify?

QUESTION 3 : Using the information provided, what should Spotify’s share be trading at on the first day of its listing? Would you recommend that Wang invest in Spotify? If so, at what price and investment horizon? (if necessary, a beta for DCF analysis is 1.15).

THANK YOU

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