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article imageOp-Ed: Top five reasons Spotify is bound for a profitable year in 2018

By Markos Papadatos     Mar 26, 2018 in Technology
Spotify, under the leadership of founder and CEO Daniel Ek, is going public next week. Here are the top five reasons it is headed for commercial success.
The streaming service told Wall Street how it is expected to do for the year. Digital Journal has the scoop.
The shares of Spotify will start trading on April 3, with a direct listing, instead of a traditional IPO (initial public offering). It is expected to generate an influx in revenue, as well as paid subscribers, while simultaneously sharpening its margins. Spotify also believes that by doing so, its losses will decrease. This "growth-oriented" strategy is expected to make business more profitable in the long run.
First, Spotify predicts that it will end the year with approximately 96 million paid subscribers, which is a major increase by 25 million from last year (when they had 71 million paid subscribers). This increase is in excess of more than one third.
Next, the streaming service believes that its revenue could increase by 30 percent, which is quite drastic (since they claim it could hit over $6.5 billion).
Then, Spotify feels that its gross margins could also increase four percent, from 21 percent to 25 percent, which is the core of Spotify's pitch to investors. The bigger the Swedish company gets, it can improve its relationship with the major music record labels.
After that, Spotify estimates that its operating losses will diminish by $91 million (from $500 million to $409 million); moreover, $50 million of those losses are expected to be a one-time charge, which is generated by the costs for its IPO.
Finally, the streaming service believes that gross margins could increase to 24 percent in the first quarter alone, which is a three percent increase from the end of 2017.
For all of these reasons and more, the future of Spotify should look bright, prosperous and profitable, especially with its IPO taking place on April 3.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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