Spotify isn't going public anytime soon

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Daniel Ek, CEO & Co-Founder of Spotify, addresses attendees during the International CTIA WIRELESS Conference & Exposition in New Orleans
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Daniel Ek, CEO & Co-Founder of Spotify, addresses attendees during the International CTIA WIRELESS Conference & Exposition in New Orleans, Louisiana May 9, 2012. REUTERS/Sean Gardner

Investors have been salivating at the prospect of investing in Spotify, one of the world’s top streaming music services. But founder and CEO Daniel Ek says it’s going to be a long wait.

Shooting down rumors from earlier this year that Spotify was aiming to go public soon, Ek said,  “It’s not really a focus for us,” while speaking at Fortune Magazine’s Brainstorm tech conference in Aspen, Colorado. “The primary thing for us is just growing the business.”

Spotify has been growing rapidly, offering a free version of its vast music library as well as a $10-per-month service that lets users pick their own songs. In May the company disclosed it had hit 10 million paying subscribers out of 40 million users worldwide.

Ek says going public would create undue pressure on Spotify to report stellar results every three months. “I personally don’t understand the quarterly capitalism of Wall Street,” he said. “I don’t think it’s good."

A private life

Spotify could stay private for quite some time. The company raised $250 million at the end of last year, with terms suggesting it was worth $4 billion. Pandora (P), a public music service which is more like traditional radio and doesn’t offer the same customization options, has a stock market value of about $5 billion. The company had 75 million active users at the end of March, some of whom pay up to $5 a month to avoid hearing ads.

In May, Apple (AAPL) said it would pay $3 billion for Beats Electronics, the headphone maker that also runs a small competitor to Spotify. Ek said he didn’t think Apple planned to do much with the streaming business but bought the company to improve its brand image.

“All points of view except being attacked by martians have been covered by the press by now,” he said of the much-scrutinized purchase. To Ek, the move represented a strategy that “Apple is becoming more and more of a lifestyle company.”

Some musicians have criticized how little Spotify pays out compared to digital download stores such as iTunes. But the problem may be between the artists and their labels. Ek said Spotify pays out about 70% of its revenue for music rights, with $1 billion going to the music industry last year.

He also highlighted Spotify’s ability to uncover new artists and help listeners expand their tastes. “An artist like Lorde wouldn’t have made it to the mainstream without streaming,” Ek said, noting that the New Zealand singer gained a massive boost in popularity after Sean Parker added her music to his Spotify playlist.

More than 1 million Spotify users follow the playlist of Parker, who co-founded Napster and was an early backer of Facebook (FB). From there, Lorde’s songs hit Spotify’s top 50 viral songs list and then its overall top 100, Ek said.

“That would never have happened in the old-school music world,” he said.

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