Spotify is a prime example of an amazing service (yet still no FLAC equivalent) offering with a highly developed customer base ruined by the love of money.
Executive compensation is part of a business’s expense, so it is not a separate issue from profit, since profit = revenue minus expense.
Also, Ek could have sold his equity years ago and made more money with less risk by sticking it in SP500. If he really loved money, wouldn’t he have gotten rid of stock in a business losing money and stuck it into something less risky?
My point is to say that Spotify is obviously in a difficult business, given the vendors it has to negotiate with, the competitors it has to compete with, and the customers it has to sell to. It is not some conspiracy or excess short term greed by executives that is hampering its success or ability to pay artists.
Spotify “loves” money implies that Spotify is penny pinching because it is in such a powerful position that it can afford to alienate customers, whereas my point is Spotify is probably making a calculation to reduce expenses because it is not even known if it is a viable business yet.
Spotify’s executive compensation is what it is, it is still a large organization managing 9k employees with 600M customers, so they obviously want a carrot to work. Shareholders and board members can vote on compensation they think is undeserved.
In fact, Ek hasn’t even received compensation since 2017, so he’s just been offloading his existing equity from being a founder from way back when. And since Spotify stock has lost money relative to the market for 7 years, Ek has been working for free. He literally could have more money if he had quit working years ago.
If the market believed there was growth potential, their annual returns would not be trailing SP500 by 3%+ per year.
Amazon’s market cap grew by much more than the SP500, because the market (correctly) anticipated Amazon being able to earn profits.
Spotify’s ability to earn decent profits is not a given, and in my opinion, their whole business is currently being a negotiating chip between the 3 businesses that own music copyrights (Warner/Universal/Sony) and Apple/Amazon/Alphabet.
Why is that relevant? The organization he has lots of equity in due to his negotiations as a founder has 600M customers and 9k employees. The public markets still believe it might be worth a few billion dollars for an organization that has 600M customers with recurring revenue.
The “tech bro” founder could have had billions of more dollars if he had dumped all his Spotify shares years ago.
It does not mean the organization is making a ton of money, or has any pricing power. An alternative is Visa or Verisign of Intuit or Microsoft or Qualcomm or Apple, those businesses have fat profit margins. Those businesses get to set their prices at the highest profit margins. Spotify barely limps along hoping one day it can eke out more than a low single digit profit margin consistently.
