Warner Music May Give Spotify Windfall Back To Artists

Major record labels aren't known for being particularly generous to their artists, but in at least one case, that might change a little. Warner Music has made it known that should it ever sell its stake in Spotify, at least some of the proceeds will go to its artists, according to a post on Music Business Worldwide. WMG CEO Stephen Cooper made the announcement when speaking to investors yesterday.

This is an unprecedented step as any income from these types of equity sales have traditionally made their way directly to the label's bottom line in the past, bypassing the artists.

The major labels own around 15% of Spotify, which came as part of the company's negotiations for licensing rights to the major label's catalog. It's estimated that WMG owns between 2 to 3% of Spotify, which at its current $8 billion valuation, is worth around $200 million.

Spotify has signaled its intention for an IPO (Initial Public Offering - where shares of the company are offered to the public for the first time) this year, which would mean a windfall for its shareholders, including the major labels.

Knowing the potential blowback from artists should they not see any money from the sale of the company they helped build, WMG decided to get on the right side of the situation instead of having to react to it after the fact.

Any resulting bad publicity from a Spotify IPO could harm the streaming side of the music business, which has grown into a major source of revenue for the industry as is quickly replacing physical sales.

As a result of this story, Sony Music announced that it would also give back a piece of the proceeds from any sale (no word on exactly how big a piece). The question now remains, will Universal Music feel compelled to follow?

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How Twitter's Stock Price Will Affect Spotify

There are a lot of music tech companies with eyes on their big score, commonly known as the IPO. Spotify is likely to be the next music tech company in line, but much depends on Twitter’s stock price over the upcoming months.

The influence of Twitter stock over music tech has been hotly debated recently, with Billboard’s Glenn Peoples stating that it will have little effect, while industry analyst Mark Mulligan claiming that the effect can be substantial. If you can’t already tell, I come down on Mulligan’s side, mostly because so much of the stock market is based on perception.

Have you even noticed that if a company’s quarterly profit doesn’t meet an analyst’s prediction, the stock price declines? This happens even if the company had what many might consider a good quarter where it was profitable and only missed the analyst’s prediction by a point or two. The reason for this? The perception that there must be something seriously wrong under the company’s hood if the arbitrary goals set by the analyst haven’t been met, regardless of how unreachable they might have been in the first place. Then there’s the case of how the stock price of a company can tank if a negative rumor gets out in the wild, even if it’s far from being true. That’s because stock prices are built more on perception than reality.

Of course that means that how Twitter does in the market will affect any tech or music tech company who’s IPO comes after it. Facebook already put a chill in the tech market when its stock didn’t perform as expected (there’s that perception thing again). Even though the stock has come back to trade above its IPO price of $38 (it’s trading around $46 today), the general feeling around it is negative and that had rubbed off on the Internet tech sector as a whole. Read more on Forbes.

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Why The SFX IPO Is Bad For EDM

SFX Entertainment’s recent IPO (Initial Public Offering) seems to have met both some backlash and bad timing, as it’s stock continues to struggle to come back to its original IPO price of $13 per share. Part of this is due to the stock market having a case of the yips over our boys in Washington being unable to come together to fund the government, so there’s your bad timing. The other part is due to the IPO stock offering being on the high side to begin with, much like the Facebook IPO last year.

But the fact that we’re even talking about the stock price rather than the company’s impact on music is the problem here, and it’s a symptom of a larger malady that pertains uniquely to the entertainment business. Once a company goes public, it becomes beholden to the stockholder and not the customer, and that’s bad for a company based around a totally creative product. In this case its music, more specifically electronic dance music (EDM), where SFX has made its big play.

Just a refresher on SFX - it’s the brainchild of chief executive and chairman Robert Sillerman, who saw how EDM was becoming the next big trend in music and wanted to cash in on its popularity. The company went on a buying spree, rolling up several event producers as well as online music store Beatport, and was planning on using the IPO money for additional acquisitions of other major EDM events.

It’s great when someone has so much confidence in a part of the music industry that he invests heavily in it, and then convinces Wall Street to invest as well, but that also brings about a self-fulfilling prophecy, meaning that when big money comes into something artistic, the art inevitably gets squeezed out in favor of something safer and more likely to result in a profit. Read more on Forbes.

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Twitter's Interesting New Usage Numbers

Twitter recently filed to go public and within their S-1 (the document that the SEC requires all public companies to make about their basic business and finances) where a number of very interesting usage statistics.

• Twitter has 100 million daily active users.
• It has about 215 million monthly active users, but 169 million (77%) are outside of the United States.
• 75% of Twitter users access it via a mobile device.
• Since it's inception in 2006, there have been over 300 billion tweets.
• More than 6 million websites have integrated Twitter.
• Most of the users outside the US are from Argentina, France, Japan, Russia, Saudi Arabia, and South Africa. 

Of course there was some interesting financial stats as well, like:

• Twitter looks to be doubling in growth this year, with revenue projected at $656 million this year.
• 87% of its revenue comes from advertising, with the rest coming from licensing agreements with companies that want better access to the platform.
• 65% of it's ad revenue comes from mobile devices.
• The company still isn't profitable, losing around $80 million last year.
• It could be worth as much as $20 billion when it finally goes public!

It will be interesting to see what happens when Twitter finally goes public, since so many times a company changes because it becomes more worried about it's stockholders than its customers. That said, it should be an interesting ride, at least in the beginning.

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

Follow me on Forbes for some insights on the new music business.

You should follow me on Twitter and Facebook for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Facebook By The Numbers

I saw this interesting set of Facebook statistics yesterday on Hypebot and thought it worth noting. It's from their May 3rd SEC S-1 filing, which is the document that companies must file explaining their business before a public offering (IPO).

A couple of figures jump out, like the 2 billion Likes per day and the fact that the network has zero penetration into China and only 60% into India and the US. Presumably that leaves some room for growth. Check out these numbers.

Total users and engagement:

• 125 billion Friendships
• 2 billion Likes per day
• 1 billion Comments posted per day
• 901 million Monthly active users
• 526 million Daily Active users
• 488 million Monthly active mobile users
• 302 million Photos uploaded each day 

User penetration:

• 85% Chile, Turkey, and Venezuela
• 60% India, the United Kingdom and the United States
• 30%-40% Brazil and Germany
• 20% Japan, Russia, and South Korea
• 0% China

Daily active users

• 526 million Worldwide total
• 152 million Europe
• 129 million M US & Canada
• 126 million Rest of the world
• 119 million Asia

Monthly active users

• 901 million Worldwide total
• 242 million Rest of the world
• 241 million Europe
• 230 million Asia
• 188 million US & Canada

Revenue (last quarter)

• $1,058 million Worldwide total
• $525 million US & Canada
• $328 million Europe
• $118 million Asia
• $87 million Rest of the world
• 82.42% Revenue from advertising
• 17.58% Revenue from payments (and other)

From Facebook's May 3rd SEC S-1 Filing via DCurt.is

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.