According to Music Business Worldwide, Universal has committed to sharing profits from the sale of Spotify stock. The exact quote is:
“CONSISTENT WITH UMG’S APPROACH TO ARTIST COMPENSATION, ARTISTS WOULD SHARE IN THE PROCEEDS OF A [SPOTIFY] EQUITY SALE.”
Sources close to Vivendi-owned UMG suggest it may have been corporately restricted from making a hypothetical public statement on the matter until Spotify officially confirmed its intention to float on the New York Stock Exchange.
This is great news and also is the right thing to do. The trick is, of course, that someone has to buy Universal’s position in Spotify in the public market.
Selling large blocks of shares in the public markets is always a tricky business, but Spotify may have made it exponentially more difficult given the “direct public offering” structure of its IPO (more properly called a “DPO”). I suspect that there will be a rush for the exits as holders of Spotify stock try to liquidate, and Universal could find itself selling alongside a fully-vested marketing consultant who left the company three years ago, artists who got shares, and of course all the other majors and Merlin.
If you believe as I do that the world of retail investing is not waiting for a Spotify IPO, this kind of robust selling could cause the price to tank in the absence of buyers or result in the kind of volume patterns you see with some shares of preferred stock (which have the “z” designation after the share numbers on the day in the stock section).
The Vivendi and Universal treasury folk are very smart people, so I’m sure they will manage the sale of their stock with an eye to avoiding tanking the stock and maximizing profit, so their interests are aligned with their artists (and presumably songwriters, too).
The next problem that we will all have to deal with is the meme that Spotify is already promoting–the reason Spotify loses money is that royalties are too damn high. I guess that means the royalties they’re not paying? Followed closely behind (A) the reason they can’t pay songwriters is because songwriters hide from them (true story, read the F-1 at p. 20); (B) Spotify wants to eliminate the “middleman” (i.e., record companies) and good luck with that; and (C) if the music industry had just built a global rights database then, then everything would be fine so Spotify’s failure to pay royalties is really our fault.
And especially those pesky songwriters who hide from them.
Even if it may take a while to liquidate Universal’s position in Spotify, it is comforting that they’re committed to doing the right thing.