The stock for audio-streaming giant Spotify (NYSE:SPOT) jumped 5% on Feb. 16 following the announcement of its newest board member, Mona Sutphen. Why does the market care so much about one board member joining the Spotify team?

Let's take a closer look and see if we can find an answer. 

What could this mean for Spotify?

Spotify has a history of appointing board members who hint at the future direction of the company. Perhaps the most obvious example was when it appointed Ted Sarandos to the board in 2016. Sarandos, who now holds the role of co-CEO at Netflix (NASDAQ:NFLX) as well as its chief content officer, helped kick-start Netflix's transition into original content in 2013. With that in mind, it's probably no coincidence that Spotify ventured into original and exclusive podcasts shortly after Sarandos' appointment to the board. 

Different devices with Spotify

Image source: Getty Images

As for Mona Sutphen, her expertise seems to be pretty wide-ranging. She was a high-ranking White House official during the Obama administration, she helped to launch several tech start-ups, and her latest position is serving as an advisor to the private equity firm Vistria Group.

Sutphen doesn't seem too tied to a particular industry. But there is one theme that seems to be present throughout her work experience: a strong understanding of international markets and regulatory environments. 

According to Spotify's latest press release, Sutphen has served various roles in which she helped determine opportunities and risks in foreign and emerging markets. She is also no stranger to legal endeavors since she spent several years as the White House deputy chief of staff for policy from 2009 to 2011. But what does this indicate for Spotify shareholders?

International expansion for Spotify?

While Sutphen's expertise across various fields will help in more ways than one, her valuable knowledge in foreign affairs points to a future of international expansion for Spotify.

In July of 2020, Spotify expanded into 13 new markets, including Russia, Croatia, and Ukraine. These launches have the potential to attract hundreds of millions of new subscribers, with Russia alone potentially contributing as many as 250 million new fans. Even more recently, Spotify announced its launch into South Korea, which according to the company is the sixth-largest music market in the world. 

The service is now available in 93 markets globally, each of which carries its own rules and risks. Sutphen's knowledge of foreign markets should ease Spotify's transition to new ones.

Negotiating help is always needed

In addition to international expansion, Spotify shareholders may want to brace for increased litigation. The company filed a formal complaint against Apple (NASDAQ:AAPL) with Europe's regulatory body in 2019. CEO Daniel Ek stated that Apple "purposely limits choice and stifles innovation." This feud has been going on for longer than a decade but wasn't actually taken to the courtroom until recently.

Along with increased legal spending, negotiations over royalty payouts will likely be heating up as well. Spotify has always paid out the bulk of its revenue to the major music labels, but listener habits are now shifting. As of Spotify's latest quarterly report, 25% of users listened to podcasts, and the share of music streams attributed to the big labels appears to be shrinking. With less reliance on the major labels, the company could end up asking for a bigger slice of its incoming revenue. Having Sutphen on board to help guide those negotiations might prove to be a valuable asset.  

Whether or not my theory on why Spotify added Mona Sutphen to the team is accurate, her expertise should be a great addition to an already impressive board of directors for what has become an impressive investment possibility. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.