ILLUSTR ATION BY JOHN UELANDKIMBERLY WHITE/GETTY IMAGES
O
N JULY 26, SPOTIFY
revealed its second-
quarter earnings, reporting
its irst full quarter as a
public company since its April 3 debut
on the New York Stock Exchange.
The results — 83 million global
subscribers, up 40 percent year over
year, and 180 million monthly active
users — sent its stock price soaring
to a record high, ending the day at
$196.28, as investors rewarded the
company for growing its subscribers
by 8 million.
In its short tenure as a
public company, Spotify
has done remarkably
well on Wall Street, as
its valuation ballooned
to as high as $34 billion.
Its relationships in the
music industry, on the other hand,
have soured. Missteps surrounding
the company’s hateful-conduct
initiative in May raised concerns
about censorship from artists and
executives, for example, resulting
in the policy being rescinded three
weeks later. And while Wall Street
was encouraged by its earnings,BY DAN RYS nd HANNAH KARPSpotify’s Delicate Balancing Act
Four months into the streaming ser vice’s life as a public company, Wall Street is
cheering its possibilities, while the music industry watches its next moves warilythe company’s losses doubled year
over year to $461 million, causing
Spotify to seek ways to reduce its
content costs.
In June, Billboard reported
that Spotify had quietly been
negotiating licensing deals directly
with managers and independent
artists, which had record company
executives privately discussing how
they could ight back. Those deals,
according to one manager who has
reviewed several ofers, are similar
for both rising and established acts,
and ask for a multiyear
licensing agreement —
which auto-renews unless
the artist opts out — and a
lower royalty payout from
which, by sidestepping
the labels, an artist
would see a larger percentage. In
exchange, Spotify ofers dedicated
marketing and promotional
assistance, but no inancial or
editorial commitments, though
ofers for some superstar acts vary.
“It’s more about having an actual
voice at the company, because a
lot of things that are done thereare automated,” says the manager.
“There’s no playlisting guarantee, but
you get the key to the castle.”
There is little that labels can do
immediately to stop Spotify from
licensing music directly from acts
they haven’t signed themselves. One
option loated was blocking Spotify’s
expansion into new international
markets, since the service needs new
music licenses in each territory. But
while each label could potentially
deny Spotify permission to launch in
a market like India, the labels can’t
collude with one another to do so.
Even if Spotify were now to
volunteer to halt its direct licensing
deals with independent acts and their
managers, some music executives
tell Billboard that it would be too
little, too late: They no longer
trust Spotify to act in the music
industry’s interests, especially with
shareholders now onboard. That
rift could make Spotify’s next round
of licensing negotiations with the
majors more adversarial, and its
deal with Universal Music expires in
under a year, sources say. Though it’s
unlikely that labels could strengthenLatin Acts Talk
Immigration
pg.SB Projects’
New Prez
pg.The New
Artist Activism
pg.Topline
83M
Number of global
subscribers Spotify
c l a i m e d o n J u l y 2 6MARKET WATCH16.49B
11.02M
326.1M
-0.3%-1.2%+19.3%TOTAL STREAMS WEEK OVER WEEK
Total number of audio and
video on-demand streams for the
week ending July ALBUM CONSUMPTION UNITS
WEEK OVER WEEK
Album sales plus track equivalent
albums plus audio streaming-
equivalent albums for the week
ending July ALBUM CONSUMPTION UNITS
YEAR OVER YEAR TO DATE
Album sales plus track-equivalent
albums plus audio streaming-
equivalent albums for 2018AUGUST 4, 2018 WWW.BILLBOARD.COM 15