Exploration Weekly - Spotify Expands to 80 New Markets / IFPI Launches SoundSys / Major Labels Discuss User-Centric Payouts and Equitable Remuneration

“Life calls the tune, we dance.”

John Galsworthy

Spotify recently announced this week that it will be expanding its service to 80 new markets around the world, including countries like Bangladesh, Pakistan, and Nigeria. The international expansion is expected to make Spotify available to more than 1 billion people globally who didn’t have access to the service before.

The International Federation of the Phonographic Industry (IFPI) has launched SoundSys, a performance rights revenue distribution system, in partnership with music tech firm Bmat and four collecting societies in Asia. The company also launched the repertoire data exchange service RDx last year.

After a detailed discussion between representatives at Apple Music, Spotify, and Amazon Music in UK’s streaming economics inquiry, the parliamentary committee holding the event published written comments by the three major labels, specifically on the topic of user-centric payouts and equitable remuneration (ER). These measures are being highlighted favorably to propose potential changes to the streaming ecosystem.

In this newsletter:

Spotify to Launch in 80 New Markets, Plans Higher Price Tier
IFPI’s SoundSys Tackles Performance Rights Revenue Distribution
Major Labels Talk User-Centric Payouts and Equitable Remuneration
Spotify Just Secured $1.3 Billion in Debt. What Could It Spend It On?
Spotify Stock Hits New High, Valuing Company at $72B

Now, the details...
Compiled by Heidi Seo

Exploration Weekly - February 26, 2021

Spotify to Launch in 80 New Markets, Plans Higher Price Tier

Spotify is expanding to 80 new markets around the world in the coming days. The international expansion, which will include countries like Bangladesh, Pakistan and Nigeria, will make Spotify available to more than 1 billion people globally who didn't previously have access to the service. The company is also adding support for 36 languages to its platform. Adding the new markets will nearly double the number of countries where Spotify is available. It currently operates its service in 93 markets. Spotify is not only growing its business by tapping into a larger pool of potential new audiences. The company announced plans to roll out a new, higher priced subscription tier, Spotify HiFi, which will offer high-quality music streaming.

IFPI’s SoundSys Tackles Performance Rights Revenue Distribution

The IFPI has partnered with music tech firm Bmat and four collecting societies in Asia to launch SoundSys, which is described as “a complete, cost-effective back-office distribution system for revenue collected for the broadcasting and public performance of sound recordings and karaoke videos”. This means that when developing a shared system, societies - in Indonesia, Singapore, Thailand and India - do not have to build it themselves. Its launch follows the debut of the repertoire data exchange service RDx last year, with the IFPI promising that the combination of the two systems “will provide a standardised, high quality recording metadata supply pipeline and data processing capability for MLCs that will significantly improve the performance rights management landscape worldwide”. The IFPI says it aims to roll SoundSys out to other parts of the world following this week’s launch.

Major Labels Talk User-Centric Payouts and Equitable Remuneration

This week, streaming services Apple Music, Spotify, and Amazon Music had their say at the UK’s streaming economics inquiry. The parliamentary committee holding the inquiry also published the latest written evidence from the three major labels. Questions surrounded the topic of user-centric payouts and equitable remuneration (ER), two of the measures that the committee seems to be looking on favorably as potential changes to the streaming ecosystem. On user-centric payouts, Universal’s filing claims to “welcome any proposal that maximizes fairness and transparency and supports market growth”, adding that the label is carefully reading the recent French study into the model. Sony’s filing said “We are agnostic as to whether a user centric model is employed as it is not meant to change the pool of money available to the labels/artists. We feel that whether a user centric model is used is ultimately a matter for the DSPs...and the artist community…”. Lastly, WMG’s filing is more critical, suggesting that “a user-centric model would not change the overall royalty pool and our analysis suggests that any changes in the allocation of payments to artists would not be significant”.

Spotify Just Secured $1.3 Billion in Debt. What Could It Spend It On?

Spotify has secured $1.3 billion in debt via the sale of private exchangeable senior notes to “qualified institutional buyers”, according to a media release published on February 24. The notes will be senior, unsecured obligations of Spotify’s US company, Spotify USA and “will accrue interest, if any, payable semi-annually in arrears and will mature on March 15, 2026, unless earlier repurchased, redeemed or exchanged”. SPOT’s explanation for what it plans on doing with this money is pretty vague, stating only that it intends to use the proceeds from the offering “for general corporate purposes”. General corporate purposes could refer to anything from capital expenditures, to stock repurchases or even acquisitions. In November, for example, Spotify was buying podcast advertising and publishing platform Megaphone for $235 million in cash. The company also spent $375 million in cash on buying podcast companies in 2019 alone.

Spotify Stock Hits New High, Valuing Company at $72B

According to news from Spotify’s global Stream On event on February 22, the company’s share price reached an all-time high of $387.44 at midday. During the presentation, CEO Daniel Ek and a host of executives announced plans to launch in 80 new markets; upcoming podcasts from Barack and Michelle Obama’s production company, Higher Ground; new tools for do-it-yourself podcasters; and a high-definition audio tier to match existing offerings from Amazon, Qobuz, Tidal and Deeper. Spotify’s enterprise value hit $72 billion, twice the €30 billion ($36.5 billion) value of Universal Music Group, Spotify’s largest music supplier. But investors’ initial enthusiasm faded away as Spotify’s share price dipped into negative territory just three hours later and ended the day down 4% from the opening price at $349.91.

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