Recent reports yielded that Warner Music Group is the third major shareholder to sell their stakes in Spotify this year. The company appears to have followed suit after Sony sold half of their shares in May and independent label Merlin sold their entire stake.
Universal Music Group is the only major company that has not yet sold their portion, though that may be due to speculation that their parent company Vivaldi intends to sell half of the Universal Music unit. Warner Music Group reaped $504 million from their sales.
Warner’s CEO, Steve Cooper, indicated that $126 million of that sale are being funneled towards paying June royalty statements to artists and labels around the world. He also indicated that the sale was not WMG’s attempt to bail out of Spotify due to a grim outlook on the business’ success. Instead, Cooper projected a positive outlook on Spotify’s future, with increased streaming competition in the form of Youtube and Amazon serving to create a healthy environment for the streaming platform’s success.
The sale certainly raises questions about what Spotify’s future holds. Last year, the company reported losses of approximately $461 million. This red margin is a continuing trend for the company since its beginnings, and they have yet to fully come out on top. The listener base is continually growing, but with that growth comes proportional growth in operating costs.
This year, the company shifted its model in bargains that earned them better rates for royalty payouts with major labels. In exchange, some artists’ content was made harder to access without a paid subscription. We still have to wait until the end of the year to see how Spotify’s margins have changed (for better or worse), but overall the outlook remains hopeful that the company’s model will succeed, despite the impression that these major buyouts may leave.
What do you think Spotify’s future is? What’s your preferred streaming service? Let us know in the comments!