Spotify’s Prospects Hinge on Echoing Netflix’s Success

Spotify’s stock has leapt to a $13 billion valuation on the secondary market, up from around $8 billion at the end of last year. It reportedly wants to go public at that new price.

Whether that price is justified depends on the answer to a question that investors are asking: How much is Spotify like Netflix? There are two ways it could be on a similar path, but neither scenario is convincing.

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“It might go up because retail investors tend to buy the thing they’ve heard of,” said Mr. Pakman, who isn’t a Spotify investor. “But I have concerns about the core business.”

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Music labels are unlikely to give a lot more money to Spotify because it still doesn’t have enough leverage.