May 7, 2018 bc_admin

Record labels reap more than $1 billion selling Spotify stakes

Spotify
Published on .

Two of the three major record labels stand to gain more than $1 billion after selling stakes in Spotify Technology SA, the streaming music company that went public last month.

Warner Music Group sold 75 percent of its stake in Spotify for approximately $400 million, CEO Steve Cooper said on a call with analysts Monday. Sony’s record label has sold about half of its stake for $750 million, according to a regulatory filing.

Spotify has proven to be a boon for the record labels, even as they remain a shadow of their former selves. Royalty checks from the streaming service have helped boost music-industry sales three years in a row.

“We were the first major music company to announce that we would share proceeds with our artists from the sale of equity in digital services — in this case, Spotify,” Cooper said.

“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. This sale has nothing to do with our view of Spotify’s future.”

Universal Music Group, the third major label, didn’t immediately respond to a request for comment about its stake.

Spotify granted the record labels equity as part of rights negotiations years ago, when the company held a fraction of its current value. Sony amassed the largest stake of any label.

Spotify has steadily added subscribers in recent years, but it was dealt a setback last week when its latest quarterly growth didn’t match investor expectations. Its shares fell more than 9 percent on Thursday and Friday following the results.

— Bloomberg News