According to the article, it is not profitable at all. It is burning cash. It also says that the company is going to IPO.
Since it is a cash-burning type company, one of the purposes of the IPO is getting more capital to run the business.
The other purposes are:
- The way for venture capital to cash-in their investment (or speculation),
- It is also a jackpot for the founder(s),
I do not know whether it is correct or not, but it seems that Spotify is a kind of business which producing more losses from more sales.
But, I do imagine a scenario where the company is trying to get monopoly in the streaming industry (albeit incurring great losses of money in the process for paying the labels and operational costs).
Then, when it achieve the position, it will renegotiate the terms with the label.
If it is true, then it is only a matter of time, whether it can achieve the position before burning all of its cash or not.
The IPO will give it a new blood, albeit temporarily since competing face to face with Google and Apple is very difficult.
Of course this kind competition is highly possible since there are examples:
- Line, Whatsapp, Wechat VS Google Hangouts,
- Box, Dropbox VS Google Drive,
- Facebook VS Google+,
In addition, if I have money to invest, I will never invest on this type of company, unless:
- It is already profitable for many years, which is not the case,
- It has no any stock option,
- It has a few debts or not at all,
- Well, it can be purchased for at least 500% of its average 5 years previous and current net income after tax (to know the real earning alone is a huge task),
- I know the industry which of course I do not,
Thus, for those who will buy the IPO, they are happy sheep waiting to be butchered.