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I.B. BAD TAKES STOCK

GRAND FUCKING SLAM: The biggest story of the year by far is the 4/3 Spotify stock launch, which neared a $30b market cap on the first day of trading before settling at $26.5b, or $149.60 a share. Opening day saw Sony Music selling a block of its shares for about $260m; what it retained was then worth about $1.2b. With an ownership stake of about 5% now, it is still the largest shareholder among the labels. Co-founder Martin Lorentzon, with 21.69m registered shares worth about $3b, and CEO Daniel Ek, with 15.84m worth about $2.2b, remain the two largest shareholders; neither sold on day one. 

Investment firms Tiger Global and TCV plus Chinese conglom Tencent are Spotify’s other largest stakeholders, followed by the major labels, but only Tencent (holding 7.5%, worth over $2b) is blocked from selling their stock at any time. (The company has to hold onto its shares until 4/3/21). The stock closed the week just under $148, with its valuation settling at $24b. Insiders wonder: Who will be next to sell? And while Sony looked like it was making a prudent decision during the first week of its new fiscal year, will other shareholders appear to be bailing if they cash out? Stay tuned.

Assuming the above valuation number holds, The Spot is now valued at about $.5b more than UMG, and $3.9b over Sony, going by Goldman Sachs numbers from last year. What does it say that the holders of the master rights to the world’s most-streamed music are presently not valued as highly by the market as a single platform for accessing that music, albeit the most popular one? Especially given that said platform is not yet profitable, and the sustainability of its business model is subject to rigorous debate?

Meanwhile, Apple and Spotify are locked in a battle for the hearts and minds of the music business and the financial press. Rights holders say that it is going to catch Spotify, initially in the U.S. and subsequently in the rest of the world, while Jimmy Iovine insists there’s no way the streaming model will be sustainable if everyone has the same content. Eddy Cue announced that Apple Music has 8m trial users; add to that a freshly touted 40m subscribers (per Steven Huon, apparently an Apple exec in Paris) for a total of 48m, compared to Spotify’s 71m (which includes an unknown number of trial users, according to their filing). If these figures are accurate, Apple is now
two-thirds the size of Spotify.

Is Taylor Swift’s defection timed to Spotify’s stock rollout, with a new check attached? Could it be that her romance with Apple Music—and especially its ostensible artist whisperer, Larry Jackson—has lost its luster? In any event, after being diligently pursued by Ek, Tay decided to give Spotify an exclusive vertical video for “Delicate,” prompting much conjecture about where her digital loyalties might ultimately lie. The smart money says Taylor will continue to do what’s good for Taylor, and the star is canny enough to know that the Spot remains, for now, the center of gravity in the streaming space.

Rights holders continue to spin that Apple streams are valued at almost double those at Spotify and 10 times what they get from YouTube per stream. But the content owners need to be careful not to slam the golden goose too hard as they drool over their piece of that forthcoming Spotify equity, while Apple Music transitions from the end of the Iovine era back to Apple lifer Robert Kondrk, who led iTunes to market dominance a decade ago.

On the macro level, total revenues from streaming are soaring at an amazing rate. Deals for established acts may not be reaching the same crescendos as those for new artists, given that the latter are propelling the streaming juggernaut. But the deals are certainly as rich as they’ve been in more than a decade. Lines like “Let me know what you need to take this deal off the table right now,” and “Stop what you’re doing right now—the big boss wants this deal done today” coming from heads of business affairs at the label and music-group levels are once again part of the vernacular. New artists’ ability to move the needle is propelling the offered numbers into the stratosphere, and the terms are morphing as well. Consequently, those lawyers whose long faces we’ve had to endure at industry events during the last 10 years are now smiling again—and that includes the whiny hourly guys like lovable Peter Paterno, that classic defender of the First Amendment. And every week there’s another doozy of a new-artist deal that moves the goalposts.

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