As Spotify prepares to officially become a public company via a direct listing on the New York Stock Exchange tomorrow (April 3), many of its early investors will be enjoying a happy return.
But buried among more visible investors like Sean Parker and Shakil Khan is a lesser-known stakeholder that’s been key to Spotify’s evolution: Coca-Cola, whose minority investment as part of a 2012 round of funding also included Goldman Sachs and Fidelity Investments. Reported to be worth $10 million at the time, Coca-Cola’s investment — at a time when Spotify’s valuation was reported at $3 billion — is expected to be worth a multiple as high as 10 to 15 times its initial value ($100 million-$150 million) by the time Spotify lists tomorrow. A spokesperson for Coca-Cola declined multiple requests for comment regarding the investment and the company’s current strategy.
Though $10 million was a relatively small investment in terms of both venture capital and Coke’s typical marketing spend (Coke paid around the same price to sponsor the entire first season of American Idol, for example), it was a watershed moment for the intersection of brands, tech and music.
Prior to Coca-Cola’s pact, brands had viewed tech as more of a sponsorship experiment to build brand equity rather than a place to build financial equity and participate in a company’s long-term growth. Brands like Coca-Cola had also spent billions on sports marketing, which still captures the lion’s share of sponsorship dollars, while music was more of an experimental investment — if brands allocated any budget toward it at all.
“We saw music consumption was accelerating for the younger generation thanks to all of the streaming platforms that were growing at the time,” says Emmanuel Seuge, Coke’s former vp global alliances and ventures, who led the investment talks with Spotify. “The question was, ‘How do we start a platform where Coke is able to be part of those moments on a daily basis?’”
To find out, Seuge teamed up with Joe Belliotti, Coke’s former head of global music marketing, for a series of involved meeting with the streaming music platforms that were beginning to steal revenue share away from downloads and physical sales in 2011 — including Spotify, Pandora, Google Music, Deezer and a pre-launch Beats Music, years before its eventual sale to Apple and the subsequent mid-2015 debut of Apple Music.
What made Spotify stand out from the pack was its ability to check off what Seuge called the “three Ps” of Coke — people, product and promise. Spotify co-founder Daniel Ek and former chief revenue officer Jeff Levick were the key people that made Seuge and Coke’s senior leadership believe in the vision for Spotify, while the company’s focus on creating a new behavior of paying for cloud-based access to all music vs. a la carte ownership checked off the product category. And the promise of global reach, where many other streaming services were focused just on the United States and one or two other territories, was an area where Coca-Cola could help Spotify expand.
“Daniel would always say, ‘I see music as a way to bring people together.’ And for Coke, which is all about universal connection, it was like he was speaking our language,” says Seuge. “It was a great translation of what Coke always tries to be as a beverage.”
One of the first territories where Coca-Cola helped Spotify launch was Mexico, in April 2013, which the brand supported with on-pack messaging on millions of Coca-Cola products and in co-branded marketing campaigns across the country. The model was then replicated across other territories around the globe, and added custom features like PlaceLists, which emphasized Coca-Cola’s interest in location-based marketing.
“We felt strongly about where music was going from an industry and consumer perspective, and it was great to have Coke present Spotify as its exclusive music partner in these markets,” recalls Levick, who departed Spotify in 2017 to become CEO of Derek Jeter-backed sports media property The Players Tribune. “It really helped us elevate the level of creativity and commitment in local markets, knowing that the highest level of Coke was an equity partner.”
As Spotify added more territories — currently, its service is available in 65 territories worldwide — its valuation ballooned as it got closer and closer to an inevitable public filing. And Seuge helped Coke beef up its tech portfolio, leading the company’s investments in other emerging platforms like Misfit, Endomondo and Riot Games, among others
After departing Coca-Cola in 2016, Seuge launched CASSIUS. Family, a venture fund that has invested in 14 companies, including ShopChat, Outdoor Voices, Dirty Lemon and Crossing Minds, several of which have already exited. Though he’s made the successful transition to full-time venture capitalist, Seuge says he traces all the risk-reward assessment back to the Coke-Spotify agreement.
“A lot of people I’ve spoken to said, ‘It’s crazy you’re not gonna make a penny off this,’” he says. “The reality is, this story has been the inspiration for me to do what I’m doing right now. There’s no price to that, it’s invaluable. Jeff and Daniel were one of the first calls I made when I was leaving Coke. To me it’s about the journey. There were moments where it was, ‘Shit, this isn’t going as planned.’ But we stuck to it because we believed in the bigger picture. And now a couple years later that’s been the No. 1 inspiration to me starting my own fund.”
Andrew Hampp is a VP at New York-based music sponsorship and experiential agency MAC Presents.