The Wall Street Journal reports that the (largely) European streaming service Deezer has pulled its initial public offering float of shares on the Euronext exchange in Paris. Let me tell you, pulling an IPO is no small thing, particularly on the eve of registering the shares. That’s the kind of thing that can ruin your whole day, and makes it very, very difficult to keep the underwriting syndicate together.
Why did it happen? Partly due to the sharp drop in Pandora stock after investors began to realize that Apple Music had made significant gains against “free music” services like Pandora and Spotify that survive on advertising often served by Spotify board member Google.
This is to be expected–even Google’s legendary ability to suppress news about its interests that it doesn’t like cannot break through this:
We can understand how a public company’s stock can get buffeted by market conditions, particularly one with as many short sellers as Pandora. Pandora can’t avoid what others do. However, Pandora can avoid being boneheads.
The WSJ tells us that another factor to the collapse of investor support for Deezer (and potentially for the ad-supported streaming sector altogether) was Pandora’s bonehead decision not to pay royalties on pre-72 recordings by artists like Duke Ellington and Louis Armstrong:
Pandora also announced it had agreed to a $90 million settlement with record labels over its unpaid use of music recorded before 1972, which isn’t protected by U.S. copyright law. The settlement, amounting to about 10% of Pandora’s annual revenue, also spooked investors already concerned about the high costs that streaming companies must pay to license music.
Remember, Pandora has only settled with the major labels. The Turtles and their courageous lawyers Henry Gradstein and Harvey Geller who had the chutzpah to bring the case in the first place are still representing the class of all other sound recording owners. If Pandora treats them the way that streaming services typically treat independents, Pandora will drag out the settlement in a game of cheap relative. Of course, now that the markets are spooked, all these services may start being more inclined to do the right thing because it affects their executives’ ability to cash out–not because it’s the right thing.
So thanks to the Turtles, Duke Ellington, Satchmo, Aretha Franklin and all the other artists who make up our musical heritage, there may actually be a “butterfly effect” from Pandora’s stupidity. There already has been at Deezer.