Everyone wants to build a giant consumer subscription business. Spotify already has one.

It is easy to be skeptical about Spotify’s about-to-be-public business, which it thinks is worth north of $20 billion. So let’s do that quickly.

Spotify:

  • Loses a lot of money.
  • Has always lost a lot of money.
  • Is a digital music business, and those businesses don’t make money.

And here’s the quick version of Spotify’s upside, expressed by people in and around the company for years:

  • We’re losing money because we’re growing. But if we wanted to stop growing we’d make money. No problem.
  • Maybe we can sell stuff beyond expensive, low-margin music. That’s why we’ve flirted with video (at one point, according to people familiar with the company, Spotify considered launching its own version of a Hulu-like internet TV service; instead it settled for a much less ambitious offering of short clips, which didn’t go anywhere), and we’re playing around with podcasts. That’s why our CEO wrote that “music has just been the beginning,” in his IPO vision statement.

So there’s both sides.

And here’s the reason I am most bullish about the business Spotify has built and is building:

  • 71 million paid subscribers.

Those subscribers pay Spotify a bunch of money. But that’s not the most important thing about them. It’s that Spotify has a direct billing relationship with most of them.

And in 2018, running your own, large direct-to-consumer subscription business — which works on any platform or device, even those that aren’t psyched about it being there —looks like a very attractive, valuable thing.

Think Netflix. Think Amazon Prime. Think whatever service Apple keeps hinting it wants to build, one day.

You can also think of Disney, and its desire to build a giant direct-to-consumer business of its own, which is prompting a big business pivot, as well as a $52 billion deal to (maybe) buy most of Fox. Or think of everyone else in the media business, who are trying to figure out how they can quickly launch subscription businesses themselves.

So once you’ve built a direct-to-consumer business with 71 million subscribers, what do you do next?

I’m not sure, but there are lots of intriguing options, none of which are mutually exclusive: You can keep adding subs, which Spotify certainly intends to do. You can raise prices, though it doesn’t seem likely to do that soon, as it looks like it has been discounting to boost its growth. You can sell other services you create yourself, if you want take the risk of moving way beyond your comfort zone. And you can rent out your billing platform to other, complimentary services, as Amazon has been doing successfully to subscription video services like Showtime.

You’re smart, so you can think of more possibilities. And if I’m thinking about betting on Spotify, the more of those you can think of, the more interested I’m going to get.

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