SPOTIFY INKS WARNER DEAL: There have been some recent developments from Spotify as they crawl towards an attempted IPO later this year. First the news from Friday. RAIN is reporting that Spotify has finalized the last of its major label royalties deals with Warner Music Group. The new deal sets royalty payments from Spotify to all WMG artists. This was a necessary step for an IPO since it gives Spotify secure access to music rights at a predictable royalty rate. Deal terms aren’t public, but historically label-direct licensing is usually paid at 2-3x the CRB’s per song royalty rate.
DIRECT LISTING TALKS GET SERIOUS, AND SERIOUSLY WEIRD: In related news, Spotify has been holding private meetings with the SEC on their plan to take the company public through a “direct listing”, instead of a traditional brokered IPO. At Spotify’s current $13B valuation this would be the largest direct listing ever on the NYSE and would be the first-ever for a tech IPO. So what would a direct list IPO mean? It’s complicated so I’ll give you a passage straight from the attached Musically link . . . “A direct listing would not issue any new shares or raise any new capital – but it would allow existing shareholders to trade their shares in the open market. This means anyone can buy shares and this can have a knock-on effect in that the company going for a direct listing cannot control the price of the IPO (the laws of supply and demand take precedence); it could also mean the price fluctuates wildly.” My read on this is most investment banks aren’t confident Spotify can get enough buy-in from institutional lenders at a $13B valuation, so they’re trying this back door method to go public. Buckle your seat belts for this one.
THE NETWORKS STRIKE BACK: Last Tuesday I featured a story about NBCUniversal’s dominance during this year’s TV Upfront buying season. But since NBC is carrying a heavyweight sports schedule in 2018 including the Winter Olympics, Super Bowl and World Cup, you had to wonder if their success was the exception compared to the other networks. But as it turns out the entire Upfront market was healthier this year. This success can be traced to two factors. The first issue of brand safety is well documented. During the Spring brands became aware of, and then squeamish about, what content their ads were being placed next to online, and are now flocking back to Network TV’s safe harbor. The second reason for TV’s upfront surge has to do with data. Not only are the networks getting better at using data to target individual households (aka addressable TV), now they’re making it easier to buy the data through a joint venture called OpenAP – a collective DMP between the major networks which allows brands to buy from one data pool instead of having to set up separate arrangements with each network. Although industry-wide billing numbers aren’t finalized yet, AdWeek has details on how the networks fared in the attached link. All in, it was a pretty impressive digital-esque performance by the biggest traditional media channel of all.
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