Warner Music Group sells Spotify stake worth over $500 million
Warner Music Group's sale of a large Spotify stake is not out of lack of confidence in the business model, but rather because the music company doesn't want to hold equity long term, said the media company's CEO.
The music conglomerate Warner Music Group announced Tuesday that it has sold its entire stake in streaming company and Apple Music competitor Spotify. The deal netted WMG $504 million, according to Variety. The company had earlier announced the sale of 75 percent of its Spotify equity.
One of the "big three" record label has maintained the Spotify purchases from the IPO. Sony Music recently sold 50 percent of its Spotify stake for around $750 million, while Universal Music Group maintains its shares.
As a result of the sale, WMG will credit $126 million to artist accounts for their June 30 royalty payments.
Back in May, Warner Music Group CEO Stephen Cooper gave his rationale for selling the shares.
"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," Cooper 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."
In fact, Cooper had praise for the sector in general.
"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," the CEO said on the earnings call, as cited by Variety. "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.
Spotify earlier this year launched a nontraditional IPO that led to direct listing on the New York Stock Exchange. The company went on to announce disappointing earnings in May. In July, Apple Music overtook Spotify in U.S. subscriber counts, although Spotify remains larger worldwide.
Warner Music Group is now privately owned by Access Industries, and while it was formerly part of Time Warner, the music company was split off from it long before Time Warner's recent acquisition by AT&T.
The music conglomerate Warner Music Group announced Tuesday that it has sold its entire stake in streaming company and Apple Music competitor Spotify. The deal netted WMG $504 million, according to Variety. The company had earlier announced the sale of 75 percent of its Spotify equity.
One of the "big three" record label has maintained the Spotify purchases from the IPO. Sony Music recently sold 50 percent of its Spotify stake for around $750 million, while Universal Music Group maintains its shares.
As a result of the sale, WMG will credit $126 million to artist accounts for their June 30 royalty payments.
Back in May, Warner Music Group CEO Stephen Cooper gave his rationale for selling the shares.
"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," Cooper 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."
In fact, Cooper had praise for the sector in general.
"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," the CEO said on the earnings call, as cited by Variety. "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.
Spotify earlier this year launched a nontraditional IPO that led to direct listing on the New York Stock Exchange. The company went on to announce disappointing earnings in May. In July, Apple Music overtook Spotify in U.S. subscriber counts, although Spotify remains larger worldwide.
Warner Music Group is now privately owned by Access Industries, and while it was formerly part of Time Warner, the music company was split off from it long before Time Warner's recent acquisition by AT&T.
Comments
They know better than anyone, and they don’t think they’ll ever get more for their shares than they will right now.
If Spotify had to pay regular rates for free tier streams, they never would have gotten to an IPO—which is what Sony, Warner and Universal have always been in this for. Spotify implodes when cut rate streams for the free tier go to regular rates.
Spotify in fact hasn't made a profit since they first started. In fact they lose more and more money every year. They make more and more money every year, of course, but then they lose more and more money on top of that, keeping them in the Red year after year. They've lost a ton of money. They had it good when it was mostly them only streaming. At this point, they're now having to fight with Google as their default streaming app on Android phones and Apple Music as default on iOS devices. Spotify you have to go out of your way to download the app. So it's getting NEW users that is continuing to get harder to get. Unless Google Music or Apple Music isn't currently in whatever country. Spotify can still grab those. Price wise, they're all the same at this point.
It's all the FREE users dragging Spotify down. The problem is, all the money they've collected to keep paying for the service to run is based on the number of Total users. They are stuck at this point. They can't toss all the millions of FREE users off the platform. They would go bankrupt pretty quickly. But Keeping the Free users are just continuously dragging them down to not being able to make a profit. They can't win either way. If you think MoviePass is a Bad business Model, Spotify is much worse off.
https://www.statista.com/chart/4894/spotify-revenue-vs-costs/
http://fortune.com/2018/05/03/spotify-earnings/
https://markets.businessinsider.com/news/stocks/spotify-loses-money-on-free-subscribers-2018-3-1018791912
https://www.rollingstone.com/music/music-news/spotify-hits-180-million-users-and-loses-even-more-money-703781/
They've been in the RED since 2008. 10 Years of losing greater and greater amounts of money every single year.
Must always...spread...fear...uncertainty...doubt.
Apple builds a whole raft of services that (mostly) work well together. Spotify has built a single service where every new customer can lead to a potential loss.
The only way streaming can be viable in its own right is if you charge the customer per song instead of a flat rate. And no one would sign up for that.
All companies who bit.
Heck no. Apple makes profits. I'm sure Apple is making way more off Apple Music than Spotify is making.
Apple doesn't like markets that break even or lose money.
At the least Spotify needs to limit its free streaming to a fixed period (3 months?).
how about this. Spotify starts optionally charging $2 month for Discover Weekly to ad based ‘free’ accounts. One of the key features of Spotify but ad supported combined with customer small $ payment.
Many many people will not pay $10 a month for music. Most sub 25s are used to it being ‘free’
Think outside that box.