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Warner confirms it has cashed in $400 million of Spotify stock

By | Published on Tuesday 8 May 2018


It’s not just Sony Music that has been busy off-loading its Spotify stock. During an earnings call yesterday, Warner Music confirmed it has now sold about 75% of the shares it secured via its original licensing deals with the market-leading streaming service.

All three majors and indie-label repping Merlin got shares in Spotify as part of those initial licensing deals. Spotify’s direct listing on the New York Stock Exchange last month meant the record companies could now cash in their stock on said exchange, ensuring a nice little extra pay day from the streaming boom that has already taken their industry back into growth.

Sony sold some of its Spotify shares on the first day of trading, before confirming at the end of last month that it had now sold about half of its stock. In total, it has probably netted about $750 million from selling those shares. Meanwhile Warner has brought in about $400 million by selling nearly three quarters of its Spotify share-holding.

You might be wondering whether all this speedy offloading of Spotify stock suggests a degree of pessimism at the big music companies about the future of the company on which their own futures now rely. But please stop wondering that. Oh go on, please.

Warner Music top man Stephen Cooper said yesterday: “Just so there won’t be any misinterpretation about the rationale for our decision to sell, let me be clear: We’re a music company, and not, by our nature, long-term holders of publicly traded equity”.

He went on: “This sale has nothing to do with our view of Spotify’s future. We’re hugely optimistic about the growth of subscription streaming, we know it has only just begun to fulfill its potential for global scale. We fully expect Spotify to continue to play a major role in that growth”. So that’s alright then.

Of course, for the wider music community, the big question around all this Spotify stock off-loading by the record companies is who will share in the profits beyond the labels and their shareholders. Most labels have committed to share the profits with their artists, and have come under pressure to also ensure any indie labels they distribute are cut in too.

Cooper reiterated Warner’s commitment to share profits with artists yesterday, while also confirming that indie labels distributed by Warner’s ADA services business should profit as well, though with a proviso on the latter commitment.

Added Cooper: “As we said, we’ll share these proceeds [with artists] on the same basis as we share revenue from actual streams and so-called digital breakage. In addition, we will be sharing equity proceeds with distributed labels, if included in their agreements with us”. Those last seven words are the proviso, by the way.

Having slipped last week following the publication of the firm’s first quarterly financial report as a public company, Spotify’s share price dropped further yesterday to $150. Which presumably means no labels will be keen to offload stock just at the moment, given the share price topped $170 at one point during Spotify’s first month on the NYSE.

The current price also means CMU – proud owner of a single Spotify share – is currently $5.17 down on the deal. To be honest, I’ve now lost all hope in the streaming business.