Archive for the ‘Spotify Meltdown’ Category

Spotify Can’t Find Songwriters Performing at Spotify High Roller Party in Cancun

January 25, 2019 Comments off

Ah, Cancun, where the elite meet and the US Consulate is located next to the jail, convenient and useful for the Tech Bros.  But faster than  bros can launch Tinder for some Spanish lessons, Spotify commits another faux pas.

According to Digital Music News:

Spotify is currently hosting a pricey offsite meeting in Cancun, Mexico, with dozens or more executives and employees participating.

Of course, Cancun isn’t usually associated with getting work done — unless that work involves repeatedly lifting rum cocktails.  But this offsite is reportedly focused on assembling content groups from various global offices.  Beyond that, we’re not sure of the exact business purpose.

One Spotify executive referred to this as a ‘Spotify Music Conference’.  Another source noted that the ‘entire content org’ at Spotify is attending the getaway.  Sounds like a lot of people.

There seems to be a strong Latin emphasis among the performers (more on that below), which makes sense given the location.  But at this stage, this looks like a broader global content and curator meet-up.

According to one source, the action is happening at the Ritz Carlton Cancun, which is surrounded on all sides by white-sand beaches and light blue waters.  According to the resort’s website, room prices start at $439 a night for an ‘Ocean View Guest Room,’ and quickly climb to $1,329 a night for the spacious ‘Club Master Suite’.

Two of the artists performing at the Spotify soiree…sorry, I mean working conference… are Nicky Jam and ChocQuibTown.  What’s strange about that is that Spotify can’t seem to find the songwriters for these two artists:

Now Spotify can explain to these artists why their songwriters aren’t getting paid–in this case, the artist/writer themselves.  Good thing we have that Music Modernization Act safe harbor that will put everything right as rain.

MTP Podcast: Spotify’s Direct Public Offering

January 10, 2019 Comments off


Chris Castle explains Spotify’s direct public offering (compared to a traditional IPO) and commentary on how the stock is performing (NOT investment advice).

According to the Spotify Case Study:

As of March 28, 2018, the average first-day return for 2018 IPOs was 13.2%. [4] On April 3, 2018, when Spotify opened for trading on the NYSE, the NYSE’s initial reference price that was published to the market pre-trading was US$132.00 per share the opening price of the shares was US$165.90 per share, or approximately 25.7% higher than the NYSE reference price. Trading in Spotify’s shares closed at a price of US$149.01 per share, which was approximately 10.2% below the opening price and 12.9% above the reference price….Spotify disclosed recent high and low sales prices per share in recent private transactions on the cover page of the preliminary prospectus and the final prospectus [to arrive at the reference price of $132].

Spotify Buyback

Spotify Case Study: Structuring and Executing a Direct Listing 

MusicTech Solutions: Why Will Spotify’s Price Tank?

Barrons: Spotify Stock Is Up This Year, but Analysts Say Don’t Get Too Excited

Spotify stock, up almost 6% this year, have dropped about 27% in the last 3 months, more than twice as far as theS&P 500’s decline.

On Monday, Stifel’s John Egbert reiterated a Buy rating on the stock, while lowering his target price to $170 from $210. That’s in part based on his estimate of the fair value of its stake inTencent Music Entertainment (TME). But he also trimmed some margin estimates based on the likely costs of global expansion.

“We remain bullish on Spotify’s subscriber growth prospects and believe the company could deliver upside to our 2019 subscriber addition forecast of 24 million, particularly if newly (and soon-to-be) launched markets become material,” Egbert wrote.

Deutsche Bank ’s Lloyd Walmsley maintained a Hold rating on the shares, cutting his price target to $135 from $152 in a Sunday note. Nomura Instinet’s Mark Kelley, meanwhile, wrote Sunday that Spotify was “among the most oversold stocks in our coverage.”

Spotify SEC Ruling on Reference Price for SPOT shares

See SPOT Fall–Does the Decline of Spotify’s Stock Price Mean Anything? — Music Tech Solutions

November 2, 2018 Comments off

What’s happening with the Spotify stock price? Chris Castle argues that the main downward driver for SPOT is the market catching up to the Spotify inflated DPO price and its subsequent insider-heavy stock sales.

via See SPOT Fall–Does the Decline of Spotify’s Stock Price Mean Anything? — Music Tech Solutions

$20 Million a Month Daniel Ek Shows “Million a Month” Tim Westergren How It’s Done

October 16, 2018 Comments off

Remember when we were all appalled that Pandora founder Tim Westergren was making $1,000,000 a month from selling Pandora stock while he was behind fighting songwriters in rate court for ASCAP and BMI royalties and stiffing artists with the Internet Radio Fairness Act and refusing to pay pre-72 artists?  And then there was the 13 bathroom house in Marin.  It was all a bit hard to stomach.

According to Jem Aswad in Variety, Daniel Ek is putting Westergren in the rear view mirror for sheer excess.  Based on SEC filings made available to a Swedish publication (probably SEC Form 4):

….Ek sold 336,213 shares $61.7 million worth of stock between July and September, and late last month signaled his intent to sell another $69.9 million sold in July–September for a total of $61.7 million.

So a little over $20 million a month, and it appears that when added to the shares he already sold and will sell, Ek should gross more than all the songwriter class action settlements combined.

“Daniel will sell a small share of Spotify shares in the next nine months as part of his long-term financial strategy. This sale of shares will constitute a minimal part of his holding in the company,” Spotify rep Sofie Grant told the [Swedish] paper. Ek and Lorentzon declined comment.

Of course, it remains to be seen how Spotify does with the several individual infringement lawsuits in Nashville and the Wixen Music Publishing lawsuit in Los Angeles. (Spotify recently lost a motion to dismiss against Bluewater Music represented by attorney Richard Busch, see Order Denying Motion To Dismiss For Lack Of Standing And Failure To State A Claim, Sept. 29, 2018, Bluewater Music Services Corporation, Inc. v. Spotify USA Inc.,  Case No. 3:17-cv-01051 (D.C. W.D. Tenn.) (2017), which also happens to be a great lesson in copyright law by the judge.)

So–Mr. Ek could spend his money on building an effective licensing operation, but….nah….Sounds like Mr. Ek is a man in need of yet another safe harbor, right?

Misreading Spotify’s Stock Behavior

June 17, 2018 Comments off


We live in an era of fraud in America. Not just in banking, but in government, education, religion, food, even baseball… What bothers me isn’t that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south.

From The Big Short, screenplay by Charles Randolph and Adam McKay, based on the book by Michael Lewis

A quick aside–Billboard recently quoted the consultant Mark Mulligan as saying the following about Spotify (which is listed as a client of his MIDiA company, among others):

MIDiA Research managing director Mark Mulligan says Spotify’s general tune has changed since the company was listed on the New York Stock Exchange in April and must now aim to become profitable. “As the bellwether of streaming, Spotify has been dictating the narrative for years, but always with the focus of being a partner for rights holders. Now that it is public, Spotify has found that tough talking trumps sweet talking,” wrote Mulligan in a June 12 blog post. “Speaking from the experience of months of deep conversations with large institutional investors, Wall Street has pumped money into Spotify stock not because of how it will help labels’ businesses, but because they expect it to replace labels, or, at the very least, compete with them at scale.”

If “pumped money into Spotify’s stock” means, among other indicators, a wave of buyers, that’s one thing that Spotify’s stock does not have and so far never has had as measured by the lower chart below (see arrow):

Spot Chart 6-17

Also remember–in Spotify’s “Direct Public Offering” model, the lion’s share of Spotify stock is initially being sold by insiders with no “lockup” restrictions (which could include consultants who got compensated in shares and cash), aside from a very, very thin public float.  A thin float is not surprising for a stock that was intentionally priced out of the range of retail traders with the cooperation of the Securities and Exchange Commission.

That means that all the Spotify insiders have a strong interest in that price staying high–aside from any big blocks of shares that are being sold in dark pools, of course, which could also be an explanation for the very low reported volume.  Traders I’ve spoken to are all watching the extraordinarily low Spotify volume and high price as are some other people.  A cautionary tale for the Securities and Exchange Commission.

So I’m not really sure what “money” that “Wall Street” has “pumped” into the Spotify stock and even if they did, you should understand that money is not going to the company–it’s going to the insiders.  The company is not issuing any new shares.

That’s because the very rules of a “direct public offering” preclude an underwriting syndicate that would actually be pumping money into the stock in a full commitment underwriting of newly issued shares.  In that situation, the underwriters would be buying new shares from the company not from billionaires like Daniel Ek.

The only pumping I see going on in my opinion is spinning that there’s pumping of cash going on.  And I’ve found that kind of pumping usually precedes the dumping.

Before we mix correlation and causation, I’d like to see some confirmation in the volume for the SPOT shares–which ain’t there as far as I can tell.  The trading pattern looks a lot more like automated market making to me (which may explain the odd support level at $150).   There’s also a “head and shoulders” technical pattern if you believe in that kind of thing or if you can believe in it on low volume and early days.

Even though it’s a truism, time really will tell.  I’m not quite sure what you can tell about SPOT right now aside from asking yourself what would you sell to buy Spotify at $170?  For most retail investors, my bet is that the answer is nothing–particularly if they remember people like Mary Meeker in the Dot Bomb crash (who avoided prison and went from “laughingstock of the Internet boom” to “legendary venture capitalist” in about ten years–welcome to Silicon Valley).

And as far as “talking tough” goes, there’s lots of people who are ready to talk tough to Spotify and there’s one big difference between them and the labels.  Some of them also carry badges.




The Return of the Fifty Dollar Handshake: Are Spotify’s Direct Artist Deals Really Less Than Meets the Eye–or Are We Looking in the Wrong Place?

June 17, 2018 Comments off

If I gave two fucks – two fucks about streaming numbers
Would have put Lemonade up on Spotify
Fuck you, fuck you, you’re cool, fuck you, I’m out (Ah!)
I ain’t never seen a ceiling in my whole life, that’s word to Blue
Freestyling live, blueprint from my Jigga who never bribes

From Nice performed by The Carters

I guess Beyoncé & Jay-Z didn’t get the memo: Spotify is pumping up the earned media about its “direct artist deals” and also trying to pump up the bizarre behavior of its low volume stock price (and that story has yet to be told but is for another day).  But the question is why would managers go through the headaches if there wasn’t more to it–like playlist placement, for example.  Think about it–if Spotify said here’s some cash and we’ll give you a better split if anyone plays your tracks, is that as enticing a story as if they also said they’d guarantee placement on key playlists?

If a terrestrial radio station did that, my bet is that would be an…uh…a whatchamacallit.  A crime.  In most if not all states, undisclosed payments for placement would very likely violate consumer fraud statutes.  So we’re way past antitrust now, boys and girls.  Fifty state attorneys general knocking on your door can ruin your whole day.

Radio payola is often referred to as “the fifty dollar handshake”–when a radio promoter would slip a $50 bill to a DJ during a handshake.  If it’s illegal on terrestrial radio, why should it be legal online?  I’m a big believer in platform parity and a level playing field, don’t you know.  Also known as Moondog’s Revenge.

As the erudite David Oxenford noted a few years ago:

The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves…But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.

Let’s look at two questions:  Payment for playlist placement and potential infringement of song copyrights in a post-Music Modernization Act world.

Here’s a summary of financial terms of these deals from Billboard:

Over the past year, sources say, Spotify has been offering to pay a number of artist-management firms several-hundred-thousand-dollar advances in exchange for licensing their acts’ music directly to its streaming services. These deals cut out record labels and independent distributors, yielding more revenue per stream for Spotify, the musicians and their managers. Since Billboard reported the terms of some of these offers on June 6, Spotify’s stock has climbed more than 8 percent, to about $178 per share, as of its June 14 close….

Some acts say they are tempted to sign direct deals with Spotify not just for the advance fee and the higher potential payouts per stream, but for the prospect of better placement on top playlists — key real estate that some managers say has become increasingly difficult to score.

Now why would the “prospect of better placement” be a factor?  More likely the guarantee of “better” placement–in terms of both the playlist and the ranking on that playlist?  And this makes the stock market “cheer” as opposed to run for the exits?

Remember that Spotify is reportedly making deals with “artist management firms” to license directly to Spotify in a way that “cuts out record labels and independent distributors”.  That also tells you that it is unlikely that any of these artists are already signed to either a major or to a digital distributor or else there’d be no one to “cut out.” Of course if they aren’t signed then no one is actually being cut out, they’re just being denied an opportunity.

So that means that either the manager has already negotiated an out in their indie distribution deal that would allow them to take the $50 handshake…sorry, the Spotify money…or their participating artists don’t have a distribution deal yet.

The manager then shops the artist to a distributor who apparently has to take subject to the Spotify carve out.  This will not be attractive to a digitial distributor who works on a distribution fee basis, and may not even be attractive to a Tunecore that puts all the distribution risk on the artist through up front fees with no risk to Tunecore.  This is perhaps because the Tunecore fees appear to be based on amortizing collection fees against the pass through float and the float will be much lower without Spotify.  This is particularly true now that streaming has destroyed the download business.

Coming to digital distributors without Spotify in 2018 is probably like coming to them without iTunes in 2008–not attractive.  But as Billboard notes, the people who really get hosed by Spotify are–predictably–the indie labels.  This will be particularly true even if the manager was able to negotiate a buyout from the Spotify deal if the artist has an opportunity to sign to a label.

So once again, a tone-deaf Spotify steps in it because they just can’t leave well enough alone.   And they are very likely selling the deals to managers and artists based on payola-style playlist placement that benefits “their” artists on Spotify’s own playlists and the consumer is none the wiser.

I haven’t seen these agreements in the flesh, but I would also bet there is another clause in there–song clearance.  Spotify is very likely putting the song clearance onto the artists so that they get fully cleared recordings delivered to them.   Understandable given Spotify’s abysmal track record on screwing songwriters, but is it realistic?

Maybe.  As long as the artist has written one hundred percent of the songs recorded–which means no publishers, no covers, no outside writers and no samples–the artist can promise to deliver fully cleared recordings including the songs.

How likely is that to happen?

Now uncleared songwriters–before you call your lawyers, remember that after the Music Modernization Act you can’t sue Spotify for statutory damages and attorneys fees for copyright infringement if you didn’t already bring your case before January 1, 2018–even if you didn’t know you had a case.

So assuming MMA becomes law later this year, you’ll have to find something else to sue for, and good luck with those attorneys fees.  Thanks, Congress.

So maybe we all have our eyes on the wrong ball.  We expect that from Spotify, but the managers can do better.

And then there’s state law prosecutions for commercial bribery.  Helloooo state attorneys general.  Not to mention federal mail and wire fraud and, of course, RICO.  No safe harbor for Danny on the RICO.

How are those copyright infringement lawsuits looking now?


Spotify’s Latest Wrong Turn: Direct Licenses With Managers for Rights They Don’t Control

June 10, 2018 1 comment

Billboard reports that Spotify’s latest and greatest is paying a minimum guarantee (aka an advance against royalties) for direct deals for artists:

Under the terms of some of the deals, management firms can receive several hundred thousand dollars as an advance fee for agreeing to license a certain number of tracks by their independent acts directly to Spotify.

That is an odd sentence for a number of reasons.

Management Agreement:  Crucially, managers typically do not (or should not) own the rights to either songs or recordings created by their artist clients.  They also typically do not (and should not) have the right to sign license agreements in the name of their artist clients.

Both these points are usually the subject of some agita in the negotiation of management agreements.  Smart managers want nothing to do with signing agreements or cashing checks in the name of their clients.  If you look at some of the prominent artist-manager disputes over the years, they almost always revolve around some version of this story (see Richard Pryor, Billy Joel, Amy Lee).

I also find it hard to believe that the artist’s lawyer would allow the client to get into one of these situations if the lawyer knew about it.

If a manager is receiving “several hundred thousand dollars” there’s also the question of double dipping or other conflict of interest if the manager is also commissioning the advance and perhaps royalties after a theoretical recoupment point.  Again, smart managers usually stay away from this kind of thing.  If you try hard enough, payments like this can look like an umm…uh…a whatchamacallit.  A bribe.

Cross-Recoupment:  Let’s say that Spotify somehow gets around these wrinkles in the management agreement, there’s a simple question of calculating recoupment since the advance will be recouped from different artists at different rates.  Let’s say that Manager X signs artists A, B and C to this arrangement, and allocates an equal portion of the advance to each artist (after commissions).  Then the algorithmically fortunate Artist C lucks out and gets into the super-popular Men of Rock playlist and recoups Artist C’s share of the allocated advance.   Artists A and B are not so lucky and are unrecouped.

Artist C will be payable, but Spotify will say not so fast…your manager is unrecouped so no cheese for you.  How is that going to go over if Artist C cares about the $0.0003 per stream?

Or what if Artist C is so algorithmically blessed that they recoup the entire advance to A, B, C and the manager’s commission.  Since Artist C only got their allocated share of the advance, Artist C’s earnings applied to Artist A and B are actually payable royalties to Artist C (as the earned royalties exceed the advance paid to C.)  Spotify will say, sorry, no cheese for you, go to your manager we already paid.  How is that going to go over?

Pre-Existing Distribution Agreements:  If an artist distributes through an indie (either digital only or full service) the artist has already given away the rights that Spotify purports to license from the manager.  Pulling tracks out of that distribution agreement is probably a breach of the exclusivity clause, particularly if the distributor already paid an advance for the recordings.

That may sound like intentional interference in a contract–but of course Spotify’s deal is with the manager, not the artist, and any distribution agreement will likely not be with the manager but with the artist.  So Spotify probably has no provable knowledge of the distribution agreement.

Future Term Recording Artist Agreements:  If Artist C gets an offer to sign to a major label during the term of this Spotify license, the label is probably going to expect these “prior masters” to be included in their deal.  No matter how impressive the algorithms, there are some basic deal points to satisfy, and the label is going to expect to see those streams show up on their account.  This can be solved pretty easily as long as no one gets greedy–the label simply buys out the unrecouped balance.

But–Spotify doesn’t have to agree to those terms and may not.  Artist C may never have had a chance to negotiate such a clause in “their deal” because the manager–who was supposed to be looking out for their client–may have “forgotten” to raise the point with Spotify and the artist is not under contract with Spotify.

If the artist is also simultaneously firing their manager as they sign with the major (which certainly has been known to happen), the manager may not be too terribly inclined to modify the terms of the manager’s deal with Spotify after the fact.

Yes, it’s sheer genius from the Spotify A&R Department (does that stand for “Algorithms and Redirects”?).


%d bloggers like this: