Record labels reap more than $1B selling off Spotify stakes

LOS ANGELES— Two of the three major record labels stand to gain more than $1 billion (U.S.) after selling stakes in Spotify Technology SA, the streaming music company that went public last month.

Warner Music Group sold 75 per cent of its stake in Spotify for approximately $400 million, chief executive officer Steve Cooper said on a call with analysts Monday. Sony Corp.’s record label has sold about half of its stake for $750 million, according to a regulatory filing.

Spotify has proven to be a boon for the record labels, even as they remain a shadow of their former selves. Royalty checks from the streaming service have helped boost music-industry sales three years in a row.

Now the labels will be able to use money from their equity sales to pay artists and fund acquisitions.

“We were the first major music company to announce that we would share proceeds with our artists from the sale of equity in digital services — in this case, Spotify,” Cooper said.

“Just so there won’t be any misinterpretation about the rationale for our decision to sell, let me be clear: We’re a music company, and not, by our nature, long-term holders of publicly traded equity. This sale has nothing to do with our view of Spotify’s future.”

Universal Music Group, the third major label, didn’t immediately respond to a request for comment about its stake.

Spotify granted the record labels equity as part of rights negotiations years ago, when the company held a fraction of its current value. Sony amassed the largest stake of any label.

Spotify has steadily added subscribers in recent years, but it was dealt a setback last week when its latest quarterly growth didn’t match investor expectations. Its shares fell more than 9 per cent on Thursday and Friday following the results.