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News August 8, 2018

Warner Music Group sells its entire stake in Spotify, will pay out to artists

John Ferguson
Warner Music Group sells its entire stake in Spotify, will pay out to artists

The Warner Music Group is not overly concerned about any moves by streaming platforms such as Spotify to directly license content from artists, according to CEO Stephen Cooper.

In an earnings call with analysts — in which he also revealed that the company has divested of its stake in Spotify — Cooper said Warner was one of the few companies on the planet that had the ability to promote and deliver music all around the globe.

“My perspective is that as the digital landscape becomes more and more crowded, our services are needed more than ever,” he said. “I am confident that it’s not going to have a negative impact on our business when artists and their managers see what it is the Warner Music Group has to offer.”

For its part, Spotify has also played down suggestions that it is looking to bypass record companies, with CEO Daniel Ek telling analysts late last month: “Licensing content does not make us a label, nor do we have any interest in becoming a label.”

Spotify

Nevertheless, Cooper said the company will continue to assess opportunities and threats on an ongoing basis. “While the move to license artists directly will be applauded by many people, I think at the end of the day, it will just be another situation that we have to deal with over time.”

During the earnings call, he also confirmed that the company had sold its remaining shares in Spotify for $US504 million. “I am pleased to say in connection with the sale of our Spotify equity, an estimated $US126 million will be credited to our artist accounts June 30 royalty settlements, which will be coming through in August and September.”

He also acknowledged the importance of streaming to Warner’s overall business. Revenue from this segment was up 22 percent in the third quarter and now accounted for 56 percent of the group’s income. “It is now three times physical revenue and seven times download revenue,” he said.

The third quarter financials suffered in comparison with the corresponding period last year, which saw the release of the latest Ed Sheeran album, Divide, but revenue for the fiscal year was up seven percent overall. Although there was no breakdown of the performance of Warner’s individual territories, earnings grew in the U.S., Asia and Latin America but declined in Europe, mainly because of decrease in physical revenue.

Ed Sheeran

Ed Sheeran

Cooper was bullish about the prospects for the remainder of the year, saying Warner had a “great release schedule” for the next six months, with many of its biggest selling acts due to be issuing new albums.

He was equally upbeat about the overall states of the global music business, with Spotify and Apple Music continuing to expand their global subscriber base, and Amazon and YouTube also showing good growth with their new offerings.

“This increased consumption is good news for our business and we are happy to see other large tech companies such as Facebook begin to recognise the true value music brings to their platforms,” Cooper added.

This article originally appeared on The Industry Observer, which is now part of The Music Network.

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