Spotify is set to sell shares on the open market for the first time today, in what is being seen as a test case for the viability of streaming businesses.
The Swedish company will make its stock market debut Tuesday, casting a spotlight on its early lead in music streaming.
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 self-titled 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 possibility 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.
Besides blending technology with a subscription model to reshape a popular form of entertainment, Spotify and Netflix have a common executive in their lineage. Spotify’s current chief financial officer, Barry McCarthy, held the same job when Netflix went public and remained in that position until leaving the video service in 2010.
Unlike Netflix, Spotify still isn’t profitable, having lost more than 2.4 billion euros ($3 billion) since it started more than a decade ago. Spotify has also made it clear that it intends to remain focused on adding more subscribers instead of making money for now.