Spotify just secured $1.3bn in debt. What could it spend it on?

Spotify has secured $1.3 billion in debt via the sale of private exchangeable senior notes to “qualified institutional buyers”.

According to a media release published yesterday (February 24), the notes will be senior, unsecured obligations of Spotify’s US company, Spotify USA and “will accrue interest, if any, payable semi-annually in arrears and will mature on March 15, 2026, unless earlier repurchased, redeemed or exchanged”.

SPOT’s explanation for what it plans on doing with this money is pretty vague, stating only that it intends to use the proceeds from the offering “for general corporate purposes”.

General corporate purposes could refer to anything from capital expenditures, to stock repurchases or even acquisitions.

If it is the latter, what could Spotify possibly be in the market for that costs over $1bn?

There are a number of avenues SPOT could choose to take here, but it’s worth reminding ourselves that the company’s acquisitions over the past 24 months have been mostly podcast-related.

In November, for example, we learned that Spotify was buying podcast advertising and publishing platform Megaphone for $235 million in cash.

The $235m spend on Megaphone meant that by November, 2020, Spotify had executed podcast-related acquisition deals worth more than $800m since February 2019.

Spotify spent $375m in cash on buying podcast companies in 2019 alone: (i) New York-based Anchor FM, which enables users to both create and distribute podcast content, which SPOT bought on February 14 for a total consideration of €136m ($154m); (ii) Podcast producer Gimlet Media, for a total deal price of $195m; and (iii) Parcast, which Spotify acquired in April 2019 for $55m.

Spotify also spent over $200m to acquire Bill Simmons-founded sports media outlet, the Ringer, in a deal announced in February 2020.

In addition to buying up companies over the past two years, SPOT has also spent a lot of money on exclusive podcast content and talent deals, like with Joe Rogan for $100m at the start of last year and with Harry and Meghan at the end of 2020 (in a deal rumored to be worth around $50m).


And if we want to think even bigger than podcasts, what else could Spotify spend $1bn on in the acquisition space?

One particular company (and one that’s been making a lot of headlines recently) immediately comes to mind: Clubhouse.

The social app is nearing a $1 billion dollar valuation following a recent raise, so SPOT would have enough cash in the bank to foot the bill.

When Spotify boss Daniel Ek was asked on the company’s Q4 earning’s call when SPOT plans on adding social features to its platform, he said that the company is “very interested in” the idea of doing so and that SPOT  “obviously pay[s] close attention to everything that’s happening in markets around the world and new developments in audio”.

The analyst asking this question noted that “apps like Clubhouse could have an interesting entry” here.

Ek added: “I’ve said this many times before. We’re in the early innings of the innovation of the audio formats and creator-to-fan interactivity is definitely one of those things that we’re paying attention to and looking at.

“We are conducting experiments on it already… I don’t have any sort of specific here to announce, but there are plenty more things to come in the coming months of this year as well when it comes to creator to fan engagements.”

Clubhouse is of course based around voice and audio rather than visual posts, and as MBW has previously suggested, the integration of an audio-centric social feature on the Spotify platform would be an interesting development.


All of that being said, Spotify might not use its new $1.3bn debt pile for an acquisition at all. That doesn’t mean it won’t fuel exciting developments at the company, however.

For one thing, it would go a long way in the R&D advancement of some of the tech patents Spotify has been granted over the past year – in areas such as 3D audio, personality-tracking technology, and an on-platform karaoke mode.Music Business Worldwide