10 Key Takeaways From Spotify’s IPO Filing

The company has an accumulated deficit of approximately $3 billion

Spotify is available in 61 countries and territories. hocus-focus/iStock

Music-streaming giant Spotify filed its Form F-1 with the Securities and Exchange Commission Wednesday to register an initial public offering.

An IPO date has not yet been set, but Spotify’s move to sell shares directly on the New York Stock Exchange without relying on underwriters may speed up the process. The company’s stock will be traded under the ticker symbol “SPOT.”

Here are 10 key stats from Spotify’s Form F-1:

1. Spotify has a significant deficit

Spotify said it had an accumulated deficit of approximately $3 billion following “significant operating losses” of $286.7 million in 2015, $425.8 million in 2016 and $461.2 million in 2017.

The company cited “significant costs” to license content, including royalties to music labels, publishers and copyright owners, saying in its SEC filing, “We cannot assure you that we will generate sufficient revenue from the sale of our premium service and advertising for our ad-supported service to offset the cost of our content and these royalty expenses. If we cannot successfully earn revenue at a rate that exceeds the operational costs, including royalty expenses, associated with our service, we will not be able to achieve or sustain profitability or generate positive cash flow on a sustained basis.”

2. In terms of audience, Spotify is dominating

The company said its user base spans across 61 countries and territories, with 159 million monthly active users of its ad-supported service (no subscription fees) and 71 million premium subscribers—nearly double the total of Apple Music, its closest competitor.

Spotify added that its global share of the streaming market (as determined by revenue) was approximately 42 percent in 2016, and those figures for its three largest markets by monthly active users (MAUs) were 41 percent in the U.S., 42 percent in Brazil and 59 percent in the U.K. The company accounted for a whopping 95 percent of the streaming market in its home country of Sweden.

3. Meanwhile, its offerings are dominated by a few major players

Four companies—Universal Music Group, Sony Music Entertainment, Warner Music Group and Merlin—accounted for 87 percent of the music streamed via Spotify in 2017.

4. Yes, Spotify is worried about net neutrality, too

Spotify urged caution about the potential effects of the Federal Communications Commission’s recent net neutrality ruling. “Our service requires high-bandwidth data capabilities. If the costs of data usage increase or access to data networks is limited, our business may be seriously harmed,” the company said in its Form F-1. “Additionally, to deliver high-quality audio, video and other content over networks, our services must work well with a range of technologies, systems, networks, regulations and standards that we do not control.”

Spotify added that “the adoption of any laws or regulations that adversely affect the growth, popularity or use of the internet, including laws governing internet neutrality, could decrease the demand for our service and increase our cost of doing business.”

5. Revenue is steadily increasing every year

Spotify tallied just under $5 billion in total 2017 revenue, up from $3.601 billion in 2016 and $2.4 billion in 2015. Revenue from its ad-supported service rose 41 percent last year, to $507.5 million from $359.9 million in 2016. Spotify also said the cost of revenue for its ad-supported business fell from 109 percent of revenue in 2016 to 90 percent in 2017.

6. But all this comes at a cost

Spotify paid almost $10 billion in royalties to artists, labels and publishers from its launch in October 2008 through Dec. 31, 2017, with expenses for rights-holders rising 27 percent in 2017 versus the previous year.

7. Listeners spend a considerable amount of time on the platform

In the fourth quarter of 2017, 25 content hours were streamed for each monthly active user (or MAU). Spotify defined content hours per MAU as “the aggregate number of hours users spent consuming audio and video content on Spotify in the quarter indicated, divided by the average of the MAUs for each month in such quarter, which is then divided by three months.”

8. Users are relying more and more on playlists

A little under one third (31 percent) of all listening on Spotify comes from editorially curated playlists (such as RapCaviar) or personalized, algorithm-generated playlists (Discover Weekly, Daily Mix, Release Radar), up from less than 20 percent two years ago.

9. Premium members are here to stay—mostly

Premium churn—premium subscriber cancellations in the quarter, divided by the average number of daily premium subscribers in the quarter, divided by three months—was 5.1 percent in the fourth quarter of 2017, down from 6 percent in the same quarter of 2016 and 7.5 percent in fourth-quarter 2015.

10. Spotify sees room to grow in its existing markets

The company cited estimates from Ovum that only 13 percent of payment-enabled smartphone users in the 61 countries and territories where it is available are on its platform.

david.cohen@adweek.com David Cohen is editor of Adweek's Social Pro Daily.