SPOT - Spotify Technology S.A.

NYSE - NYSE Delayed price. Currency in USD
118.23
+0.22 (+0.19%)
At close: 4:02PM EDT

119.50 +1.27 (1.07%)
After hours: 6:07PM EDT

Stock chart is not supported by your current browser
Previous close118.01
Open118.33
Bid117.00 x 1100
Ask118.05 x 800
Day's range117.20 - 119.30
52-week range103.29 - 161.38
Volume707,999
Avg. volume1,314,636
Market cap21.251B
Beta (3Y monthly)N/A
PE ratio (TTM)N/A
EPS (TTM)-7.63
Earnings date28 Oct 2019
Forward dividend & yieldN/A (N/A)
Ex-dividend dateN/A
1y target est162.58
Trade prices are not sourced from all markets
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  • A Prenup Is the Latest Must-Have for Tech Startup Founders in Love
    Bloomberg

    A Prenup Is the Latest Must-Have for Tech Startup Founders in Love

    (Bloomberg) -- The young woman in Monica Mazzei’s San Francisco law office was adamant: She wanted a prenuptial agreement.Never mind that the client had barely anything to her name. What she had was a bunch of startup ideas. She and her fiancé, who already had his own small tech company, signed a prenup with clear terms, Mazzei said: “The spouse who has an idea [and] starts a business ‘owns’ that business. It’s their baby.”A few years later, Mazzei, a partner at Sideman Bancroft, was traveling through the San Francisco airport when she saw her former client on a magazine cover. Her startup had struck gold. Her husband’s business had fizzled.In Silicon Valley, where penniless programmers fervently believe their ideas are worth billions, getting rich can take priority over getting married. California law assumes that any wealth created during a marriage is community property, which should be split equally in a divorce. That’s alarming not just for young entrepreneurs but also their investors.Divorce HavocFortunately, a well-written prenup is a safeguard against post-divorce havoc, which is why more and more young couples are insisting on the agreements, according to more than half-a-dozen lawyers in the Bay Area and elsewhere. Long popular with older wealthy couples who re-marry, prenups are also being demanded by entrepreneurs who want to keep future windfalls to themselves.“I am seeing more and more young people want to enter into prenuptial agreements who do not currently have a lot of money now but plan to have a lot of money someday,” said Manhattan-based divorce attorney Jacqueline Newman.In a 2016 survey by the American Academy of Matrimonial Lawyers, 3 in 5 divorce attorneys said more clients were seeking prenups in the past three years. About half said they’d seen a spike in the number of millennials requesting the agreements.“People’s concepts and notions of fairness when it comes to privately held businesses are changing,” said Mazzei, adding she’s seen “a tremendous increase” in prenups in the past eight years. “They feel that even if they’re married, this is their passion. The agreement should be reflective of that.”‘It’s Complicated’Today’s startup founders have plenty of prenup-writing forebears to emulate. Google co-founder Sergey Brin and Anne Wojcicki, who helped found personal genomics company 23andMe, had a prenup when they married in 2007. After they divorced with little fanfare in 2015, his stake in Google remained unchanged.“It’s complicated -- that’s all I can say,” Wojcicki told Bloomberg TV about the split.Oracle Corp.’s Larry Ellison has been married and divorced multiple times, but none affected his stake in the software company. Ellison is the seventh-richest person in the world with a net worth of $59.8 billion, according to the Bloomberg Billionaires Index.Still, a prenup hardly guarantees a smooth divorce. Judges can and do throw out the agreements, especially if they’re drafted poorly. “If you don’t put in the right language, a lot of prenups don’t do the job,” said Lowell Sucherman, a divorce attorney at Sucherman Insalaco in San Francisco.In 2017, One Kings Lane co-founder Alison Gelb Pincus, wife of Zynga Inc. founder Mark Pincus, challenged their premarital agreement in court while the couple was getting a divorce, according to a court filing. It’s unclear whether she prevailed as final terms of the divorce aren’t public.While venture capital firms don’t explicitly require prenups, they do demand legal language protecting their investments in the event a divorce court hands a chunk of a founder’s shares to an ex-spouse. So do other co-founders.Founders’ Control“Founders have wanted to ensure that someone else can’t suddenly come in and obtain some sort of founders’ control,” said Par-Jorgen Parson, a partner at venture capital firm Northzone, who has served on the board of Spotify Technology SA. “It’s just as often driven by the founders as by external investors. You don’t want to rock the balance of power.”Venture capital firms often demand that founders’ husbands and wives sign “spousal consent” forms. Such agreements determine who gets to vote for board members, and how and when shares can be sold. In the event of a divorce settlement (or death or disability), a founders’ spouse might end up with company shares. But, the agreements ensure that an ex can’t exercise much, if any, control over the company post-divorce.“We’re trying to make sure that people don’t become involuntary business partners with someone they don’t know, don’t like or who aren’t qualified,” said James Ficenec, a partner at Newmeyer & Dillion in Walnut Creek, California.Divorcing founders will often do anything to avoid handing over half of their shares in their startup.‘Keeping More’“Founders will try to negotiate keeping more of their shares,” said Michael Gorback, a partner at Hanson Bridgett. “You might balance it out some other way,” by paying exes in cash, a home or other investments.MacKenzie Bezos and Amazon.com Inc. founder Jeff Bezos divorced earlier this year, leaving her with a 4% stake and a net worth of $34.6 billion, according to the Bloomberg index. He kept 75% of the couple’s Amazon shares, and retains voting control of those she does hold.Amazon’s stock, of course, is publicly traded, which can make divorce negotiations easier.“One issue we come across very often is, ‘How do you value a startup?’” Mazzei said. Years before an initial public offering, a startup might have no profits or even revenue to speak of. A promising company could later go under -- or eventually be worth billions.Trust, CredibilityIn a divorce, “it can be quite difficult when you have a large asset that is illiquid,” said Lyssa Grimaldo, a wealth manager at San Francisco-based Wetherby Asset Management and a certified divorce financial analyst. Adding to the problem, she said: “One partner knows more about that asset than the other.”With enough billable hours, lawyers can usually sort out the legal ramifications of divorce. They’re less helpful in containing the chaos that a founder’s marital problems might create in the workplace or business relationships.“We have companies where the founder is the brand, and trust and credibility are core to the business,” said Ed Zimmerman, partner and chair of the tech group at Lowenstein Sandler in New York. “If you are investing in a company because you think the founder is amazing,” it can be alarming to learn that he or she is facing the distraction of an acrimonious divorce or custody battle, he said.If a divorce isn’t disclosed to key investors, they can lose trust in a founder who they thought they knew well. Then there’s sometimes other nasty fallout, of the sort that companies are increasingly sensitive to in the metoo era.“It would be great if we lived in a world where people who had marital problems didn’t manifest those problems by hitting on or dating people who worked at their company,” Zimmerman said. “Those kinds of things tend to be more problematic than who gets the shares.”(Updates with adviser’s comment in 23rd paragraph.)To contact the reporters on this story: Ben Steverman in New York at bsteverman@bloomberg.net;Anders Melin in New York at amelin3@bloomberg.netTo contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Steven Crabill, Peter EichenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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  • Exclusive: Antitrust probers in Congress ask Spotify to detail alleged Apple abuses - sources
    Reuters

    Exclusive: Antitrust probers in Congress ask Spotify to detail alleged Apple abuses - sources

    The U.S. House of Representatives Judiciary Committee reached out to the music streaming service with broad requests for information, according to one source, who added the request to the company was narrowed in follow up telephone calls. Spotify Technology SA filed an antitrust complaint against Apple in the European Union in March, but the contact with the committee marks its first known participation in congressional inquiries into the iPhone maker, whose Apple Music streaming service is Spotify's biggest rival. Spotify and other developers have alleged that Apple engages in anticompetitive behavior by imposing rules that hamper distribution via its App Store, the only way for third-party developers to reach more than 900 million iPhone users.

  • Profits at Spotify's UK division climbed by 95% in 2018
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  • At Private Silicon Valley Summit, No Love for IPOs or Banks
    Bloomberg

    At Private Silicon Valley Summit, No Love for IPOs or Banks

    (Bloomberg) -- If you’re 30 minutes into a poker game and you don’t know who the patsy is, you are the patsy. That was the Warren Buffett-inspired message delivered to technology startups and their investors at a closed-door event late Tuesday to promote alternatives to initial public offerings.Wall Street banks, argued Bill Gurley of venture capital firm Benchmark, are the ones dealing the cards and making suckers out of everyone else, according to people who attended the event. The poker metaphor came up repeatedly over the course of the afternoon, which concluded with a dinner conversation between Gurley and Michael Lewis, author of “Liar’s Poker” and “The Big Short.”Silicon Valley investors and entrepreneurs met in the hundreds on Tuesday for the event at the Palace Hotel in San Francisco, described in a handout to attendees as an “industry-led symposium on the benefits of the direct listing approach.” Direct listings are a rarely used alternative to an IPO, in which a company makes its shares available for trading on a stock exchange without the formalities of a traditional public offering. That means a scaled-down roadshow, no fundraising and fewer fees for banks.“We’re not out to start a fistfight, we’re not out to vilify a particular bank,” Gurley said in an interview after the summit. He conceded that banks have to satisfy both their corporate clients in an IPO, as well as buy-side investors. “There’s that old saying, ‘Don’t hate the player, hate the game.’ It may be that the game has changed in a way that all of these players are self-optimizing.”The main target of ire was the first-day stock surge that often accompanies IPOs underwritten by banks. A video aired by Henry Blodget compared that to selling your house for $1 million and then seeing it resold soon after for double the price.Gurley posted a picture of a grand wedding, explaining that bankers and other advisers frame an IPO as a once-in-a-lifetime event. “It’s an important business transaction. If you get into a dreamy mode of thinking of it like a wedding, you lose the fiscal discipline you should be applying because it’s one of the most expensive transactions you’ll ever do,” he said.The venture capitalist estimated that more than $6 billion in wealth has been transferred from companies to IPO investors from recent stock-market debuts that jumped soon after the offering. “The buy side has been trained for free giveaways. They’re more entitled than a millennial,” he said. “It’s a very long-term issue that has negatively impacted our industry.”Gurley, who helped organize Tuesday’s convention, has spent much of the last year promoting direct listings. He was first to plant the idea with Stewart Butterfield, chief executive officer of Slack Technologies Inc., according to a person with knowledge of the interaction. In June, the corporate software company became the second major business to go that route in recent years, after Spotify Technology SA. Slack’s general counsel, David Schellhase, spoke at the summit, advising companies to hire an investor relations expert early and spend ample time with public investors, said a person who listened to the presentation.Some attendees were convinced and plan to consider alternatives. “I expect this to be a regular agenda item for board discussion for companies looking to go public,” said Sarah Cannon of Index Ventures, which backed Slack.Airbnb Inc. is on track to be the largest tech company to embrace this new path. The home-rental company, valued by private investors at $35 billion, has said it intends to go public next year and is leaning toward a direct stock listing.One downside of direct listings is that they don’t raise new funds for the companies involved. That’s unnecessary for some startups that have already raised hundreds of millions of dollars in private markets. But other companies need the new money to fund growth, pay off debt or cash out early investors.Two of the highest-profile companies in Benchmark’s portfolio, Uber Technologies Inc. and WeWork, chose traditional IPOs -- with dire results for some investors. Uber shares are down more than 30% from the May offering price, and WeWork pulled its plans recently. Then again, Spotify and Slack are also below their debut listing prices. That raises a question of whether IPOs are a scapegoat for a larger problem: Public equity investors just aren’t buying the rich valuations that several large tech startups got in private financing rounds.That idea was largely ignored at Tuesday’s confab, in favor of criticizing Wall Street. None of the three largest IPO advisers -- Goldman Sachs Group Inc., Morgan Stanley or JPMorgan Chase & Co. -- was featured in the speaker lineup. Goldman and Morgan Stanley also worked on the Slack and Spotify direct listings.“The takeaway is not only that a direct listing is something you can do, but something you should do,” said Manny Medina, CEO of software startup Outreach Inc., who attended the event. “You’re getting money that should be yours.”(Adds Gurley quote in seventh paragraph.)\--With assistance from Patrick Clark.To contact the reporters on this story: Sonali Basak in New York at sbasak7@bloomberg.net;Sarah McBride in San Francisco at smcbride24@bloomberg.netTo contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, ;Michael J. Moore at mmoore55@bloomberg.net, Alistair Barr, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Wall Street really hates Spotify stock and I am shocked
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  • Direct Listings? Better Than IPOs, But Not Good Enough
    Bloomberg

    Direct Listings? Better Than IPOs, But Not Good Enough

    (Bloomberg Opinion) -- I suppose if my venture capital firm had been the second-largest outside investor in the We Co. after having been the leading financial backer of Uber Technologies Inc. — yeah, I’d be looking for a new way to take companies public, too.That’s probably a little unfair to Bill Gurley, the high-profile partner at Benchmark Capital, the firm in question. To give him his due, he’s long complained about the flaws in the initial public offering process. But please forgive me. On Monday, when I read that he and Michael Moritz of Sequoia Capital had organized a big meeting of technology company executives and venture capitalists to promote a new way to go public — called a “direct listing” — I couldn’t help thinking that what finally moved Gurley to act were those twin disasters.The meeting took place on Tuesday, and the two VCs are hoping that in its aftermath, “going public” will never be the same. That may or may not be a good thing.In 2017, you’ll recall, Gurley orchestrated the coup that led to the resignation of Uber’s founder and chief executive, Travis Kalanick. The ouster was surely necessary, but it brought to light Uber’s many problems, starting with its toxic bro culture.  This past May, when Uber finally went public — using the traditional method of hiring investment bankers to organize a road show and set the IPO price — it was a disaster for just about everyone except Gurley himself, who pulled down a reported $600 million, according to Bloomberg.Priced by the underwriters at $45 a share, Uber opened at $42. Four months later, it is hovering just below $30, down 35 percent since its IPO. After announcing a $5 billion loss in its first quarter as a public company, it is hard to see the stock gaining ground anytime soon.As for We — the parent company of WeWork — well, you know what happened there. The company had hoped to raise $4 billion in an IPO, money it badly needed to continue expanding. But when potential investors read We’s prospectus and realized that the company’s economics were highly problematic, and that its chief executive, Adam Neumann, had been enriching himself all along, they revolted. Although Neumann stepped down, We withdrew its public offering on Monday.On the one hand, you can make a pretty good case that the IPO process actually worked with both Uber and We. Private investors, caught up in the hype, had wildly overvalued both companies, while the tougher scrutiny that came with an IPO valued them realistically. On the other hand, Uber’s public investors are losing fistfuls of money, while We’s venture capitalists and other insiders haven’t been able to cash out. That’s hardly how Silicon Valley defines success.The essential case against a traditional IPO — the case Gurley has been making for years — is that it’s a rigged game, with Wall Street doing the rigging. The investment bankers allocate the shares, which they give mostly to big mutual and hedge funds that are their best customers (and who typically kick back some of their profit in the form of commissions). The bankers often purposely misprice the IPO so that the stock will “pop” when it starts trading publicly, thus guaranteeing those who get IPO shares an instant profit. To state the obvious: The free money those Wall Street clients get from the pop is also money that companies are not getting, even though the point of the exercise is meant to raise capital.(1)Despite its self-image as a “disruptor,” Silicon Valley has been loath to mess with the IPO process. Tech startups like the prestige of having a Goldman Sachs or a Morgan Stanley as their lead underwriter. Executives like ringing the bell at the stock exchange when their company goes public. In many cases, they even like the pop, seeing it as great free publicity. What they don’t like are the steep investment banking fees — traditionally 7% of the offering — and the fact that they have to wait 180 days before they can sell stock after the IPO.For Gurley and Moritz — and presumably others — the lightbulb went on in the spring of 2018, when Spotify Technology SA used direct listing to go public.In a direct listing, a privately held company becomes a publicly held company when the private shareholders — venture capitalists, company executives and employees, and others who were able to acquire shares while the company was still private — sell stock directly into the public market. Simple as that.For venture capitalists, a direct listing is “manna from heaven,” says Lise Buyer, a former Google executive who advises tech companies planning to go public. With a direct listing, the VCs and company executives don’t have to wait 180 days to get a return on their investment — it’s their shares that serve as the IPO stock. The company has to release financial information, but there is no need for an extravagant road show. While bankers aren’t cut out entirely, there are fewer of them and they get smaller fees.No wonder venture capitalists like direct listings! Yet a direct listing has a serious flaw: The companies themselves get none of the money that’s raised. It all goes to private shareholders. The proponents of direct listing say that that’s not a big issue because companies today can raise so much capital from private investors, prior to going public, that the need to raise capital in an IPO is less pressing than it once was.That certainly may be the case for an Uber or an Airbnb (which is said to be considering a direct listing), but I imagine most companies will still want to use a public offering to raise capital. That will limit the utility of the direct listing model.It also has a second flaw. If the exact right number of shares aren’t offered during the direct listing, the initial price will not reliably reflect how the market is going to ultimately value the stock. With both Spotify and, more recently, Slack Technologies Inc., the aftermarket has not been kind to the stocks. Which is to say, the direct listing mispriced the stocks — it was just a different kind of mispricing from a traditional IPO.There is a third model for going public, one that is superior to both the traditional IPO and the direct listing model. It’s called a Dutch auction. In a Dutch auction, potential investors list how many shares they are willing to buy and at what price. When a certain price attracts the number of shares the company wants to sell, all the investors who have bid at that price or higher get those shares.A Dutch auction does not require high-priced investment bankers. There is no pop, so it maximizes the amount of money the company raises. It arrives at a true market price. And there is no particular need for a 180-day lockup; private investors can sell shares alongside the company.The one big IPO that used the Dutch auction method was Google’s. It was a roaring success and proved that a Dutch auction was the fairest method yet devised for taking companies public.In 1998, Bill Hambrecht started a new company, WR Hambrecht & Co., determined to convince Silicon Valley of the beauty of Dutch auctions. The firm did a few small deals, but the idea never got much traction after Google. I called him the other day to ask him about it.“It was frustrating,” he told me. “After Google we had some real momentum.” The firm did a few other Dutch auctions, but then worked on a handful of deals with several of the major investment banks. “They marginalized us,” he said. The big firms’ sales forces hated his method, and undercut it. When the financial crisis arrived, Hambrecht threw in the towel. Companies simply felt more comfortable using big-name bankers, even though the IPO process wasn’t necessarily in their best interest.Venture capitalists like Gurley are right to want to disrupt the IPO process, which has long put Wall Street ahead of companies. But the model they prefer helps them a lot more than it helps companies.The Dutch auction is the one model that puts companies and the stock-buying public first and foremost. But it doesn’t do a thing for investment bankers or venture capitalists. No wonder nobody wants to use it.(1) Back in 2013, I got my hands on internal Goldman Sachs documents relating to the 1999 IPO of eToys. Goldman set the IPO price at $20, but the stock immediately shot up to $78 — meaning that thanks to its underwriter, the company left some $450 million on the table, far more than it actually raised. This was no accident. The documents I saw included an email from the lead banker betting her colleagues that the stock would hit $80 at the opening. You can read my old story here.To contact the author of this story: Joe Nocera at jnocera3@bloomberg.netTo contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Sony's PlayStation Now Needs More Than a Price Cut
    Bloomberg

    Sony's PlayStation Now Needs More Than a Price Cut

    (Bloomberg Opinion) -- Sony Corp. has halved the price of its PlayStation Now subscription games service. Competition from console rival Nintendo Co. as well as new offerings from Alphabet Inc.’s Google and Apple Inc. are the obvious reasons.In addition, though, PlayStation Now failed to live up to its potential. At $19.99 per month,(1)the product was way overpriced. After four years, Sony has just 700,000 paid subscribers. That’s less than 1% of the 96.8 million PlayStation 4 units the company sold by the end of March.As Sony, Nintendo and Microsoft Corp. enjoy loyalty and ongoing revenue streams from subscribing services for games, both Apple and Google enjoy a clear advantage in something far more valuable: attention.What these companies are really competing for isn’t share of the games market but consumer time. A minute watching Netflix or swiping Tinder is a minute not spent playing GTA or Super Mario Kart. In that respect, Google and Apple are both able to grab user attention multiple times per day thanks to their iOS and Android smartphones. Even Nintendo’s handheld Switch can’t compete.Complicating the matter for Now is Sony’s own rival offering,: PlayStation Plus, which goes for $9.99 per month. Now is a streaming service like those provided by Netflix Inc. or Spotify Technology SA, while Plus is more of a community that allows online multiplayer games, offers just two free PS4 titles per month, and provides some other benefits.By cutting Now to $9.99 per month, Sony’s gross margins and average selling price on that service will suffer. Yet the unit economics mean that longer-term revenue and operating profit in this division can expand. By my reckoning, Sony should be able to hit 1.5 million paid Now members by the end of September 2020; if not, then I would consider PlayStation Now a failed product that needs to be reassessed.As proof, we can look at Plus. It offers a lesser games catalog than Now, albeit with other compelling features, but had 36.4 million subscribers at the end of March – that’s 50 times more than Now. Price is a major factor in users’ purchase of a subscription, according to Nielsen Co.’s Superdata. So with that hurdle lowered, Now ought to be attractive enough to get the same level of attention.Yet if loyal consumers want both access to the deepest catalog of games, and interactive features and other benefits, they shouldn’t be forced to shell out twice. Instead of milking customers, Sony would be better served by either folding Now and Plus into one service or offering a steep discount to have both.This isn’t just out of fairness to customers, but a matter of survival. Nintendo’s Switch Online is just $3.99 while Microsoft has Xbox Game Pass at $9.99. Apple’s Arcade is $4.99, and Google’s Stadia costs $9.99. By asking for double its nearest rival, Sony is throwing away the advantage it enjoys by having a superior product for the sake of a few dollars more. That’s reminiscent of its failures with Memory Stick storage cards and BluRay DVDs, mistakes it ought not to repeat.With five big names now offering games subscriptions, it’s clear that the business model is evolving beyond single-unit sales. By selling all-you-can-eat packages, Netflix and Spotify schooled Apple at a time when the iPhone maker was still charging per song and per movie.Sony can also learn from Netflix and Home Box Office Inc. that offering competitive set-price packages doesn’t mean you need to forgo blockbuster titles. In fact, Sony’s access to the highest-quality games is the moat that rivals will struggle to cross.The move toward games subscriptions will be good for the entire industry by bringing in more total revenue. That also makes it Sony’s battle to lose.(1) It's discounted for longer-term subscriptions.To contact the author of this story: Tim Culpan at tculpan1@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Amazon Roundup: Hardware Event, Amazon Care, Music, Alexa, Partnerships, Acquisitions, Climate Change
    Zacks

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  • Investing.com

    StockBeat: Spotify Slides, but Wall Street Bear Says Shorting Opportunity Limited

    Investing.com – Spotify (NYSE:SPOT) fell Tuesday, joining in on the broader market selloff, but sentiment on the streaming music company has been lifted after a Wall Street bear upgraded his rating on the company.

  • Peloton has a music problem
    Yahoo Finance

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    Peloton disclosed music rights as a risk factor before it went public.

  • It doesn’t matter that Peloton shares tumbled on their first day: Morning Brief
    Yahoo Finance

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    China's Wealth Fund Is Diving Into a Crowded Pool

    (Bloomberg Opinion) -- The world’s second-largest sovereign wealth fund is playing a dangerous game.China Investment Corp. aims to have as much of 50% of its portfolio in alternative assets by the end of 2022. That means the $941 billion fund is diving deeper into illiquid investments including real estate, infrastructure, hedge funds and private equity just as such trades are becoming increasingly crowded. CIC will also be diminishing its exposure to public markets that have rebounded strongly this year. For all the jitters over weakening global growth and the trade war, U.S. stocks are nudging record highs again and the MSCI World Index has climbed 17% in 2019.It’s little wonder that CIC is seeking ways to juice returns. The Beijing-based fund reported a 2.35% loss on overseas investments for last year as global equity markets tumbled, according to results posted Friday. That was the fourth unprofitable year for the international portfolio since CIC’s creation in 2007, when the fund was carved out of China’s then-ballooning foreign exchange reserves.CIC already has the among the highest proportion of investments allocated to alternative assets among state-owned global money managers, according to data from Sovereign Wealth Research, a unit of  IE University in Madrid. At the end of December, the ratio stood at 44%, equal to Australia’s Future Fund. Singapore’s GIC Pte had 19% of assets in alternative investments. The share for Norway’s Government Pension Fund Global, or GPFG, was just 3%. GPFG proposed changes to its mandate last month to allow it to buy stakes in unlisted companies after missing out on investments such as Spotify Technology SA. Norway’s government has repeatedly declined to let the sovereign wealth fund, the world’s biggest, enter the global private equity market because of concerns over transparency and management costs.Every investor would like to get his or her hands on the next hot unicorn in the hope that it will turn into another Facebook Inc. or Amazon.com Inc. once it goes public. That task isn’t getting any easier, though.  The presence of behemoths such as SoftBank Group Corp.’s $100 billion Vision Fund (and a second fund of similar size) have made the competition for lucrative investments more intense. And in any case, unicorn IPOs haven’t been doing so well lately, as my colleague Tim Culpan noted earlier this year.Three years ago, CIC had 46% of its overseas portfolio in publicly traded equities and 37% in alternatives. By the end of last year, the roles had reversed, with the share in stocks down to 38%. The fund’s international portfolio accounts for 34% of its assets.The Chinese fund faces hurdles that may impede its goals. CIC has lost key managers over the past two years, undermining the talent pool that’s necessary for successful hedge-fund and private-equity investing. In addition, China’s overseas acquisitions are facing tougher scrutiny amid rising trade tensions with the U.S. Marquee acquisitions such as the $13.8 billion purchase of Blackstone Group LP’s European logistics business Logicor in 2017 are likely to be harder to come by in future.Chairman Peng Chun struck a gloomy tone in the fund’s annual report, noting that “protectionism and unilateralism will continue to spread, geopolitical conflicts will recur, trade tensions will intensify, global economic momentum will weaken” and international capital markets would become plagued with uncertainties.CIC has cited volatility for wanting to reduce its exposure to public equity markets. That overlooks the fact that stocks are at least more liquid and easier to exit. There are also questions over the fund’s timing. In 2012, CIC posted losses after the commodities cycle peaked. Back then, bulking up in fixed income would have been a better bet. This move into alternatives may be another ill-timed wager. To contact the author of this story: Nisha Gopalan at ngopalan3@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

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