Here's when music giant Spotify will finally IPO

Music streaming giant Spotify aims to IPO in the second half of 2017, according to Bloomberg, which cites five people familiar with the matter.

Earlier this year, Spotify raised $1 billion in debt, The Wall Street journal reported. Bloomberg says investors valued Spotify at $8 billion at the time. But the debt included “onerous guarantees,” the Journal wrote.

What does that mean? One term allowed investors to convert their stakes at a 20% discount when Spotify IPOs, a discount that will “grow larger over time,” a source told Bloomberg.

Terms like this put pressure on 10-year-old Spotify to IPO. The problem will be in convincing investors that the business can make a profit. Spotify rival Pandora has struggled as a public company, while its other big rivals, like Apple Music, don’t need to make a ton of money for their larger parent companies. No company has been able to truly prove that streaming music is a massively profitable business on its own.

To improve Spotify’s margins, CEO Daniel Ek has been trying to negotiate lower payout rates to labels, Bloomberg reports. Spotify right now pays 55% of its sales to record labels, and 70% of revenues to the music industry generally (including publishers, and so on). Bloomberg reports that Spotify wants to get it its label share down below 50%, but talks appear to have stalled. Rival Apple pays labels 57.5% of sales.

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