Spotify, the music streaming giant, has recently moved into its new luxurious headquarters in Urban Escape, a recently restored city block in central Stockholm. According to Swedish real estate news website Fastighetsvärlden (FV), the move happened on Monday and was considered “the worst kept secret in Stockholm real estate”.
The new office’s square meter price of 7,000 SEK ($823) will add up to annual rent costs of some $16.5 million for the company, with an estimated surface space of about 20,000 square meters. The move to Urban Escape represents another expensive investment for the company, which has previously rented offices in New York, San Francisco, Boston, and Gothenburg.
Spotify’s pattern of lavish spending has been worrying investors ahead of its IPO next May. Earlier this year, the company spent more than $566 million on a 17-year lease in Manhattan, with almost $31 million in upfront payments required. The pricey rent comes alongside major label guarantees of over $2.34 billion over the next two years. The streaming platform has now locked down long-term royalty deals with all three major labels. This all adds up to a lot of money being spent on top company exclusives who have reportedly earned 7-figure incomes. CEO and co-founder Daniel Ek earned $4.5 million this year, while Chief Product Officer Gustav Söderström reported $7.9 million.
The lavish spending could have broader repercussions on Wall Street. While Spotify remains the current streaming music leader, its position remains highly unstable. Apple Music recently acquired Shazam for $400 million, part of a strategy to jumpstart its subscriber rolls. Then there’s the threat of a serious Apple-powered package. With a monthly subscription to a broader suite of devices and services, Apple could quickly reach as many as 300 million paying subscribers for its music offering.
Despite its recent valuation at over 19 billion, some fear that Spotify may actually be over-leveraged. Since its launch in 2008, Spotify has yet to post a profit, which is a concern for investors. The company’s focus on making a profit has been questioned, as it seems to be more focused on spending money on luxurious offices and top executives’ salaries.
Spotify’s move to Urban Escape is one of the most expensive office moves in recent history. However, the company has yet to comment on the move, which is not surprising given the criticism it has faced for its spending habits. Investors will be watching closely to see whether Spotify can turn a profit and how it plans to compete with Apple’s growing music offerings.
In conclusion, Spotify’s move to its new headquarters in Urban Escape highlights the company’s pattern of lavish spending. While the company remains the current streaming music leader, its position remains highly unstable, with Apple Music and other competitors making significant moves in the industry. The company’s focus on spending money on luxurious offices and top executives’ salaries has been a concern for investors, who are eager to see Spotify turn a profit. With its IPO coming up next May, the company will have to prove that it can compete in the highly competitive music streaming industry and make a profit.
Featured image by Urban Escape