Warner Music sold all shares in Spotify.
Warner Music Group announced that it has now sold its entire stake in Spotify, realizing $504 million. While its total and digital revenue were up, Warner Music Group suffered a significant dip in the quarter that ended June 30, 2018, with its operating income at $28 million compared to $51 million in the same period last year; OIBDA dropped to $99 million compared with $115 million. Total revenue grew 4.5% (or 1.9% in constant currency) while digital revenue was up 16.1% (14.1% in constant currency), representing 60.1% of total revenue, compared with 54.1% in the same quarter last year. Net income was $321 million compared with $143 million in the same period in 2017.
The net income increase was “largely attributable to a $317 million gain (net of tax) on the sale of 75% of the company’s Spotify shares, announced in May, and foreign currency gains on Euro-denominated debt.” CEO Steve Cooper announced during the call that the company has sold its remaining shares in the streaming service, realizing $504 million, $126 million of which will be distributed to artists.
Earlier Sony sold shares in Spotify.
“Sony owned 5.707% of Spotify’s shares (5.082% on a fully diluted basis) at the time of the public listing, approximately half of which have been sold to date,” the filing reads. “Due to the public listing and the subsequent sale of a portion of such shares owned by Sony, Sony expects to record an unrealized valuation gain for the shares Sony continues to hold after the listing and a realized gain for the shares sold, net of the estimated amount to be shared with its artists and distributed labels. The sum of the unrealized valuation gain (net) and the gain on the sale of shares (net) to be recorded for the fiscal year ending March 31, 2019 is expected to be approximately 100 billion yen in total,” or around $910 million.
“Sony Music and The Orchard are committed to sharing with their artists and distributed labels any net gain they may realize from a sale of Sony Music’s equity stake in Spotify,” the company said in a statement in March. “This is consistent with our previously announced policy of sharing breakage and equity proceeds from digital catalog licenses with our artists and distributed labels.”
Merlin also sold its shares.
Merlin, the international independent label collective, is the latest recorded-music group to sell its Spotify shares — all of them, in fact, for an amount well over $100 million, according to reports in Music Week and Music Business Worldwide. The organization says it has already passed the proceeds to its members, which number more than 800 representing tens of thousands of labels and artists in 53 countries.
The estimated Merlin’s share as of last month is believed to be worth between $128.2 million and $151.4 million.
“Merlin is an organization that exists solely to maximize the value of our members’ rights and keeps only the monies that it needs to operate,” CEO Charles Caldas told Music Week. “It is outside of Merlin’s remit to hold a long-term equity position in a publicly listed company where there is a liquid and transparent market for that equity. We therefore worked quickly to liquidate our interest in Spotify and have passed the proceeds to our eligible members.”
That leaves Universal, and apparently there are no immediate plans to sell shares in Spotify.
How will this influence NIM?
With many of the major music labels (including Merlin) selling their shares and no longer have shareholders influence in Spotify we might see that Spotify are diverging into other areas of content. The recent deal with the video streaming service Hulu and integration of Hulu included in the Spotify Premium for students shows this.