Warner Music Group Sells Its Entire Stake in Spotify
By Jem Aswad
LOS ANGELES (Variety.com) – UPDATED: In its earnings call on Tuesday morning , Warner Music Group announced that it has now sold its entire stake in Spotify, realizing $504 million.
CEO Steve Cooper said that the sale resulted in $126 million “credited to artist accounts on their June 30 royalty statements which are issued around the world in August and September.” A rep confirmed that distributed labels are included in that amount, if their deal terms call for it.
“In February 2016, we were the first major to announce a policy to share proceeds from equity in streaming services with artists,” he noted. However, Music Business Worldwide reports that unlike Sony Music, which is also sharing proceeds from the sale of its equity, Warner is not overlooking artists’ and labels’ unrecouped balances, which means that the proceeds could go not directly to the artist but to Warner as part of the recoupment of an artist’s advance and/or other label expenses. A rep for WMG did not immediately respond to requests for comment or confirmation on that matter.
Sony Music sold approximately 50% of its shares for an estimated $750 million, the company revealed in a public filing in May, while independent label collective Merlin sold 100% of its shares for an amount estimated at upward of $125 million and immediately distributed the earnings to its members. Universal Music Group has not sold its shares, perhaps in anticipation of parent company Vivendi’s plan to sell 50 percent of that business unit.
“While Apple and Spotify continue to grow their global subscriber numbers, Amazon and YouTube are both off to a great start with their premium services,” Cooper continued. “This increased competition is good news for our business, and we’re happy to see other large tech companies, such as Facebook, begin to recognize the true value that music brings to their platforms.
“We believe it’s hugely positive that, in today’s world, artists and songwriters have more choice, as well as more control over their careers. In such a world, we’re uniquely positioned to help creative talent navigate increasingly complex ecosystems to unlock their biggest opportunities. We’re one of the few companies that can offer artists and songwriters global impact across all platforms, services and geographies.
In announcing the company’s initial sale of 75% of its Spotify equity, Cooper was quick to note that the company’s decision does not reflect a lack of confidence in Spotify’s future. “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 said. “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.”
Asked about the sale on the call, Cooper added, “I think at the moment our valuation reflects what we believe is fair. The speculation about [whether] Universal Music Group [will sell any of its equity] remains speculation at the moment, and with respect to public versus private, to the best of my knowledge [Warner parent company] Access prefers private, so I think that while we’re seeing a lot of interesting movement in the world of music. The only one that’s really materialized is Spotify, and the valuation that they received was expected, and good for them.”
