From the information provided, it appears Spotify is quite good at losing money and hence Jennifer Wang should not invest in the firm. While the company revenue increased by 49% and the gross profit more than twice in 2017, the operating loss of Spotify increased by 8% due to a massive 64-percent increase in the costs of operation. Since its launch, Spotify has paid over $10 billion to musicians. It has not been stated clearly how the management is going to change this trend. It is difficult to see gross margins swelling materially since the company’s music supply is compactly controlled by four players and the recently, the Copyright Royalty Board ruled that music-streaming services should increase payments to songwriters by about 43% over the subsequent five years.

One can predict that Spotify could solve the problem with volume, but this can only be possible if the management slows its ever-increasing operating cost.  Without clear procedures and guidelines on the ways the management plan to build a sustainable business, the notable company losses could result in runs of earnings disillusionments.

The average revenue per paying user by Spotify has declined each of the last two years. It is evident that the decline rate fast-tracked from 9-percent in the year 2016 to approximately 14-percent in the year 2017. The decline might be attributed to a family plan that permitted up to five individuals to share an account for $14.99 a month instead of $9.99 price per individual subscriber. Student plan, which is lower-priced, is also a factor. Declining average revenue per paying user is an unfortunate trend particularly an accelerating decline, and it is not clear what the management plan to do to stabilize the situation.

The largest companies in the world, Amazon, Alphabet, and Apple are the prime competitors of Spotify. These players control nearly all mobile devices including smartphones and laptops, more online stores than any other companies do. These competitors have balance sheets greater than the annual GDP of most countries. Even though Spotify has the most significant number of music subscribers in the world currently, the stiff competition, especially from these giants, should not be taken for granted.  For example, the Apple Music store is determined to overtake Spotify as soon as a few months to come. Besides, Spotify lacks the opportunity similar to that of Netflix because it does not have the same opportunity to create as well as its own content.

If the company goes public, it would have a potentially lucrative opportunity.  Digital-music services benefit from the forth industrial revolutions themes experiences, Personalization of AI-enabled, and low-cost distribution that lever enhancements in devices. From the information, the company is the biggest streaming music service industry with fast increasing usage, users, and revenue. However, it has failed to develop a clear plan to profitability and is yet to correct its financial problems as well as build a better dike against its competitors who are Goliath by nature. Before all these are done, it would be risky for Jennifer Wang to consider investing in the company.

The biggest strength of Spotify is based on how it offers music discovery and music access. Whether it is a lucrative investment will depend on how the company ties its strengths to viability what it is yet to do. It will be quite challenging, and Jennifer Wang should wait to see how the company will reduce the royalties it pays to studios and musicians while ensuring the content producer remain contented. It is a difficult task, which if solved then would place the company at the top position in the world.

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