A peek into Spotify’s challenges before its IPO

The music streaming service Spotify reveals some of its secrets

Welcome to Plain English, the podcast that goes at the right speed for English learners. I’m Jeff and today is March 12, 2018. On today’s program, Spotify opens up and reveals some of the company’s secrets in advance of becoming a public company traded on the New York Stock Exchange. In the second half of the program, we’ll review the English expression “game the system.” I’ll tell you what it means, but I won’t recommend that you do it!

Don’t forget that the transcript of every episode is available on the web site, PlainEnglish.com. The transcripts should help you identify and understand every word—especially if you speak Portuguese, Spanish, French or Chinese. That’s because the transcripts have instant translations of hard words from English to those four languages. Today is episode 28, so the link is PlainEnglish.com/28.

Ready to dig into today’s topic?

Spotify preps for its IPO

The music streaming service Spotify is preparing to go public. Going public means that the privately-owned company will begin selling shares of itself in the stock market.

Before a company goes public in the United States, it is required to disclose a lot of information about itself that had previously been kept secret . Spotify has traditionally guarded its information closely , so this is the first time the world is learning about the company. Here are a few interesting things we learned this week.

First of all, it disclosed that it has 159 million monthly users, 71 million of whom are premium, paying subscribers. They are growing very fast : paid subscriptions are increasing 46 percent each year. That’s huge .

Interestingly, the vast majority of the streams come from artists signed with the four biggest record labels: Universal, Sony, Warner, and Merlin. Under the current system of music labels, Spotify doesn’t pay the artists directly—it pays the labels , who then pay the artists according to the terms of their individual contracts. Some artists have been outspoken about how little they make from each stream .

Spotify revealed that some artists have tried to game the system over the years. As you probably know, Spotify pays labels—or artists directly if they’re unsigned —for every song streamed. So one band called Vulfpeck got creative in 2014 and released an album of lots of songs that were entirely silent . The band then asked its fans to stream the silent album, called Sleepify, while they slept . They made enough money from this trick to pay for an entire tour—but Spotify had to shut down that gimmick .

Spotify counts a stream after 30 seconds, so some bands in the UK are releasing songs of exactly 30 seconds, so their fans can listen to more of their songs in the same amount of listening time. We’ll see if those songs prove popular , but I have a feeling they’re mostly a joke.

This being 2018 , Spotify has to contend with bots —or little computer programs that are designed to fool the system by “streaming” songs over and over, even though no person is actually listening. Apparently, a group from Bulgaria was able to make hundreds of thousands of dollars from doing this. Spotify’s documents suggest that they have to keep up with the scammers who try to game the system— either innocently , like the Vulfpeck, or maliciously like the bots in Bulgaria.

The documents also included a personal letter from the founder of Spotify, Robert Ek, in which he talks about his vision for the company . We all know Spotify as a music streaming service, but the company wants to be bigger than just music. It says it wants to be a cultural platform for all types of creators and provide a way for artists to make money directly from their efforts. A lot of people are interpreting this statement as a not-so-subtle warning to the record labels. Remember that the labels sign the artists, and the labels get paid by Spotify. Based on some of what Robert Ek is saying, I think he would love to break down that system and let artists make money straight from Spotify, without having to be signed by the big labels.

There are a few examples of how that’s already happening. The New Zealand singer Lorde’s song “Royal” became a global hit after Facebook co-founder Sean Parker put the song on his public Spotify playlist . If Spotify gets its way, more and more artists will go the way of Lorde or Chance the Rapper and bypass music labels entirely.

If you believe in the vision and have some money to invest , you’ll be able to buy shares of Spotify later this month when they start trading. Just keep in mind that although they had $5 billion in sales last year, they actually lost money since their expenses were even higher.

I want to say hi to two listeners who sent me notes this week. Lucio, from Monterrey, Mexico, who said he uses the program to improve his English at work, and Daniel from Cordoba, Argentina. Muchas gracias to Lucio and Daniel for listening from Mexico and Argentina.

Before we get to today’s expression, just a quick reminder that I send out e-mails associated with every show . The emails have links to the English articles that I use to prepare the main content. That way, you can read more about any topic that particularly interests you. The emails also talk about one more word or expression that didn’t make it into the audio version . If you want to get those every Monday and Thursday, just go to PlainEnglish.com/mail and enter your details.