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From TFA, since people love to react just to a headline: “Just so there won’t be any misinterpretation about the rationale for our decision to sell, let me be

From TFA, since people love to react just to a headline: “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.”

colordrops 8y ago
So why don't they keep the shares of they are so optimistic?
- lemiffe 8y ago
  Potentially for immediate liquidity to invest in multiple new assets? I assume they made quite a bit of profit on their initial Spotify investment.
- m12k 8y ago
  My guess is they probably made the investment in the first place to make sure they were onboard if/when music streaming took off. Now that it's well established, and there are competing services, they are probably better off by not playing favorites and being able to squeeze Spotify when negotiating licenses without harming their own investment (similar to what the movie industry is doing with Netflix).
  - mcny 8y ago
    What stops Spotifyfrom trying to fight back with more tools for recording artists? Find out what artists need and allow them to self publish on Spotify? I imagine recording an album is orders of magnitude cheaper than just the production cost of Westworld or black mirror. I mean just following the Netflix route in general. Is Spotify already doing this?
    - seventhtiger 8y ago
      Publishers do more than deliver music to the audience. They do market research, facilitate collaboration, fund production, and they promote the music. Even if musicians can reach the audience directly, which they already could for some time now, they benefit a lot from a publisher that creates opportunities and handles business while they focus on making music. Too many good indie musicians are just a publisher away from success.
      - calgoo 8y ago
        There are also many publishers who are horrible people, lock people into huge contracts where they basically kill the artist off by forcing them to produce crap. There is a need for another change in the music industry, removing the need for the big publishers and handing power back to the creators. I agree we need new tools to replicate the other tasks that the producers do apart from funding production / studio time. The question becomes if we have reached a time when having a good twitter/snapchat/facebook profile is enough to promote an artist. Then there is the question of what an artist/creator actually needs to earn to be successful. Is it enough to live on, provide for your family, and let you save for retirement? Does your goal really need to be to become a mega-star making millions? Its my opinion that if we reduce the expectancy of the artist/creator to more of a "standard" earning level, then there might not be as much need for the big producers? It might also make artists happier by giving them the option of being creative without as much control of outside forces.
      - deathhand 8y ago
        >Too many good indie musicians are just a publisher away from success. But with the GP argument one could say an algorithm away...
      - lenocinor 8y ago
        Yeah. The real trick (at least in the US) is to get your music on the radio (see https://qz.com/1094963/radio-survived-the-tape-cd-and-ipod-in-the-age-of-spotify-its-more-popular-than-ever/ https://qz.com/1094963/radio-survived-the-tape-cd-and-ipod-i... for an example). People still seem to look for new music on the radio here, and a publisher can make that happen much easier than Spotify can.
- sp527 8y ago
  They have access to investment opportunities with a higher expected return and they are therefore rebalancing capital. Spotify is now a large, public company with attendant growth expectations. Most substantial corporations can allocate capital more effectively than leaving it in a publicly-traded equity.
- slivym 8y ago
  What purpose does it serve. Any investor looking to invest in WMG isn't going to do so because they own some spotify. If someone wants to invest in Spotify they will go buy some spotify stock. It doesn't serve investors to have some of their capital tied up in an unrelated stock. The normal reason for having stock in another company is in order to get favourable terms in a negotiation - which I do think could be useful here, but isn't always the case.
sshine 8y ago
When companies hold stock as a means of storing capital, the portfolio should be diverse to avoid risk. Spotify stock is highly correlated with their own line of business. Unless you're a strategic investor, holding any one stock is just not profit optimizing.
- antt 8y ago
  From memory the vast majority of Yahoos stock market value comes from the fact they own a large stake of AliBaba.
- patd 8y ago
  I'd say they were in a position of being strategic investors. There are only a handful of major labels and Spotify is slowly killing legal downloads which itself killed physical copies. They owned a piece of the future of music distribution. And as shareholders and content providers they could squeeze every bit of profit their way. They've redistributed the profit of the sale so they're not going to reinvest it. My guess is that they plan on squeezing Spotify even more and know that this will kill the valuation. As there are more strong competitors now (Apple Music is said to soon overtake Spotify in the US), killing Spotify doesn't matter much.
  - jamespo 8y ago
    Globally Apple Music and everyone else is significantly behind Spotify
    - scarface74 8y ago
      Apple is growing faster than Spotify (https://bgr.com/2018/07/06/apple-music-vs-spotify-subscribers-apple-wins/ https://bgr.com/2018/07/06/apple-music-vs-spotify-subscriber...) and Apple doesn’t live or die by Apple Music like Spotify does. You should always be afraid when your entire reason for living is a feature of a larger company.
      - drchickensalad 8y ago
gadders 8y ago
Of course, it would also make sense to sell the stock if they were going to pull their catalogue or start their own service.
tanilama 8y ago
It is just not convincing. Their action tells all.
mlthoughts2018 8y ago
I don’t believe the stakeholders listed in the article have sold for routine reasons, simply because the amounts of money they realized in the sale are tiny in an absolute sense, especially for Sony and WMG. They didn’t hold the stock to make a small absolute profit from it (whatever the return rate is, at a small total sale price like a few hundred million it’s irrelevant). I think it only makes sense to materialize such a small profit right now if it’s based on highly negative outlook about Spotify’s valuation.
logfromblammo 8y ago
If you read between the lines in that statement, they classify Spotify as "publicly traded equity" as though it were some random stock rather than "a music streaming service--a new class of company that will be essential to music distribution in the future and therefore a wise investment for us to hold indefinitely". They say "our view of Spotify's future" rather than "what we intend to do to Spotify". They say "We ... expect Spotify ... to play a major role" instead of "We intend to undermine Spotify among its competitors so that it cannot become the dominant player in their market and therefore lay claim on some of the revenue streams that we feel should go to us exclusively". I hope they shoot themselves in the foot with a diarrhea-dipped bullet, and then die from the infection. Old-school music publishing is full of assholes. It has been for a century. The major publishing groups are preparing to stab Spotify in the back. Or the gut. Wherever. They don't care. They just want a bigger piece of everyone else's pie. My first guess is that they read the financial statements as shareholders, figured out exactly how much they could charge for their catalogs without killing Spotify, and then pulled out, because their stock wouldn't be worth anything once they were taking all the money out on the operating expenses end rather than the dividend end. Every public statement they make is a misrepresentation, especially the ones that say they aren't misrepresentations. Spotify needs to go direct to the musicians, and get as many self-cover and faithful cover recordings as possible, as quickly as possible. They might lose the major performing artists, but if they can sub in a cover band or fresh recording under different copyright that sounds almost as good as the original, I certainly won't care, and I'm guessing a lot of other people feel the same. I like Weezer's "Africa" better than Toto's, and Cake's "War Pigs" better than Black Sabbath's. And there are a variety of "Ring of Fire" covers that I prefer to Johnny Cash. The publishers only control their recordings. If you can license the music and lyrics from their copyright holders, you can get new recordings that cut the previous publishers out entirely.
- mywittyname 8y ago
  Spotify would be taking a serious risk should they attempt to become a record label, that is, they may find themselves locked out of competing catalogs. I think you're spot on in your analysis. It's clear that the record labels intend to destroy Spotify, now that they've profited nicely from the arrangement. My thinking is, the record labels are colluding to decimate Spotify's profitability by strong-arming them into onerous licensing terms, then once the share price drops sufficiently, the labels will join together to take over Spotify entirely. I don't think Spotify can take the Netflix approach and win. Their only avenue for victory may be the legal system.

colordrops 8y ago

So why don't they keep the shares of they are so optimistic?

lemiffe 8y ago
Potentially for immediate liquidity to invest in multiple new assets? I assume they made quite a bit of profit on their initial Spotify investment.
m12k 8y ago
My guess is they probably made the investment in the first place to make sure they were onboard if/when music streaming took off. Now that it's well established, and there are competing services, they are probably better off by not playing favorites and being able to squeeze Spotify when negotiating licenses without harming their own investment (similar to what the movie industry is doing with Netflix).
- mcny 8y ago
  What stops Spotifyfrom trying to fight back with more tools for recording artists? Find out what artists need and allow them to self publish on Spotify? I imagine recording an album is orders of magnitude cheaper than just the production cost of Westworld or black mirror. I mean just following the Netflix route in general. Is Spotify already doing this?
  - seventhtiger 8y ago
    Publishers do more than deliver music to the audience. They do market research, facilitate collaboration, fund production, and they promote the music. Even if musicians can reach the audience directly, which they already could for some time now, they benefit a lot from a publisher that creates opportunities and handles business while they focus on making music. Too many good indie musicians are just a publisher away from success.
    - calgoo 8y ago
      There are also many publishers who are horrible people, lock people into huge contracts where they basically kill the artist off by forcing them to produce crap. There is a need for another change in the music industry, removing the need for the big publishers and handing power back to the creators. I agree we need new tools to replicate the other tasks that the producers do apart from funding production / studio time. The question becomes if we have reached a time when having a good twitter/snapchat/facebook profile is enough to promote an artist. Then there is the question of what an artist/creator actually needs to earn to be successful. Is it enough to live on, provide for your family, and let you save for retirement? Does your goal really need to be to become a mega-star making millions? Its my opinion that if we reduce the expectancy of the artist/creator to more of a "standard" earning level, then there might not be as much need for the big producers? It might also make artists happier by giving them the option of being creative without as much control of outside forces.
    - deathhand 8y ago
      >Too many good indie musicians are just a publisher away from success. But with the GP argument one could say an algorithm away...
    - lenocinor 8y ago
      Yeah. The real trick (at least in the US) is to get your music on the radio (see https://qz.com/1094963/radio-survived-the-tape-cd-and-ipod-in-the-age-of-spotify-its-more-popular-than-ever/ https://qz.com/1094963/radio-survived-the-tape-cd-and-ipod-i... for an example). People still seem to look for new music on the radio here, and a publisher can make that happen much easier than Spotify can.
sp527 8y ago
They have access to investment opportunities with a higher expected return and they are therefore rebalancing capital. Spotify is now a large, public company with attendant growth expectations. Most substantial corporations can allocate capital more effectively than leaving it in a publicly-traded equity.
slivym 8y ago
What purpose does it serve. Any investor looking to invest in WMG isn't going to do so because they own some spotify. If someone wants to invest in Spotify they will go buy some spotify stock. It doesn't serve investors to have some of their capital tied up in an unrelated stock. The normal reason for having stock in another company is in order to get favourable terms in a negotiation - which I do think could be useful here, but isn't always the case.

sshine 8y ago

When companies hold stock as a means of storing capital, the portfolio should be diverse to avoid risk. Spotify stock is highly correlated with their own line of business. Unless you're a strategic investor, holding any one stock is just not profit optimizing.

antt 8y ago
From memory the vast majority of Yahoos stock market value comes from the fact they own a large stake of AliBaba.
patd 8y ago
I'd say they were in a position of being strategic investors. There are only a handful of major labels and Spotify is slowly killing legal downloads which itself killed physical copies. They owned a piece of the future of music distribution. And as shareholders and content providers they could squeeze every bit of profit their way. They've redistributed the profit of the sale so they're not going to reinvest it. My guess is that they plan on squeezing Spotify even more and know that this will kill the valuation. As there are more strong competitors now (Apple Music is said to soon overtake Spotify in the US), killing Spotify doesn't matter much.
- jamespo 8y ago
  Globally Apple Music and everyone else is significantly behind Spotify
  - scarface74 8y ago
    Apple is growing faster than Spotify (https://bgr.com/2018/07/06/apple-music-vs-spotify-subscribers-apple-wins/ https://bgr.com/2018/07/06/apple-music-vs-spotify-subscriber...) and Apple doesn’t live or die by Apple Music like Spotify does. You should always be afraid when your entire reason for living is a feature of a larger company.
    - drchickensalad 8y ago

gadders 8y ago

Of course, it would also make sense to sell the stock if they were going to pull their catalogue or start their own service.

tanilama 8y ago

It is just not convincing. Their action tells all.

mlthoughts2018 8y ago

I don’t believe the stakeholders listed in the article have sold for routine reasons, simply because the amounts of money they realized in the sale are tiny in an absolute sense, especially for Sony and WMG. They didn’t hold the stock to make a small absolute profit from it (whatever the return rate is, at a small total sale price like a few hundred million it’s irrelevant). I think it only makes sense to materialize such a small profit right now if it’s based on highly negative outlook about Spotify’s valuation.

logfromblammo 8y ago

If you read between the lines in that statement, they classify Spotify as "publicly traded equity" as though it were some random stock rather than "a music streaming service--a new class of company that will be essential to music distribution in the future and therefore a wise investment for us to hold indefinitely". They say "our view of Spotify's future" rather than "what we intend to do to Spotify". They say "We ... expect Spotify ... to play a major role" instead of "We intend to undermine Spotify among its competitors so that it cannot become the dominant player in their market and therefore lay claim on some of the revenue streams that we feel should go to us exclusively". I hope they shoot themselves in the foot with a diarrhea-dipped bullet, and then die from the infection. Old-school music publishing is full of assholes. It has been for a century. The major publishing groups are preparing to stab Spotify in the back. Or the gut. Wherever. They don't care. They just want a bigger piece of everyone else's pie. My first guess is that they read the financial statements as shareholders, figured out exactly how much they could charge for their catalogs without killing Spotify, and then pulled out, because their stock wouldn't be worth anything once they were taking all the money out on the operating expenses end rather than the dividend end. Every public statement they make is a misrepresentation, especially the ones that say they aren't misrepresentations. Spotify needs to go direct to the musicians, and get as many self-cover and faithful cover recordings as possible, as quickly as possible. They might lose the major performing artists, but if they can sub in a cover band or fresh recording under different copyright that sounds almost as good as the original, I certainly won't care, and I'm guessing a lot of other people feel the same. I like Weezer's "Africa" better than Toto's, and Cake's "War Pigs" better than Black Sabbath's. And there are a variety of "Ring of Fire" covers that I prefer to Johnny Cash. The publishers only control their recordings. If you can license the music and lyrics from their copyright holders, you can get new recordings that cut the previous publishers out entirely.

mywittyname 8y ago
Spotify would be taking a serious risk should they attempt to become a record label, that is, they may find themselves locked out of competing catalogs. I think you're spot on in your analysis. It's clear that the record labels intend to destroy Spotify, now that they've profited nicely from the arrangement. My thinking is, the record labels are colluding to decimate Spotify's profitability by strong-arming them into onerous licensing terms, then once the share price drops sufficiently, the labels will join together to take over Spotify entirely. I don't think Spotify can take the Netflix approach and win. Their only avenue for victory may be the legal system.