@musicbizworld: THE GREAT BIG SPOTIFY SCAM: DID A BULGARIAN PLAYLISTER SWINDLE THEIR WAY TO A FORTUNE ON STREAMING SERVICE?

[Tim Ingham tells a story of a Spotify royalty scam run by a “Bulgarian playlister” (…stop right there and go no further…who was running what are obviously scam playlists of snippets by manipulating Spotify subscription accounts.  As Tim notes, the fact that the “Bulgarian playlister” was able to manipulate a large number of “paying” subscription accounts, raises yet more important questions about Spotify’s subscriber numbers.  This is obviously of vital importance to potential buyers of Spotify’s stock–what subscriber numbers are real.  Perhaps the Securities and Exchange Commission will question the man behind the curtain.]

A Bulgarian playlist-maker scammed the Spotify payout system for months last year – and could well have made themselves a millionaire off Daniel Ek’s platform.

That’s the shock claim being made by multiple high-level industry sources to MBW this week.

Music Business Worldwide can today reveal details of the alleged shakedown, which reached its height at the end of last summer.

The evidence we’ve gathered strongly suggests that one party sucked a vast amount of money – as much as $1 million-plus – out of the Spotify royalty pool, and away from legitimate artists and labels.

And the best/worst part of all? They probably didn’t break any laws in the process….

Spotify tells us it’s now “improving methods of detection and removal”. But the big question remains: are the scammers out there improving their methods too?

Are there others, like our Bulgarian friend, purchasing multiple premium Spotify accounts and rinsing playlists stuffed with cheap music to which they own the rights?

If so, how many of these Spotify scammers exist – and how much money are they generating?

Are they operating at a lower commercial level than The Bulgarian and, therefore, not outing themselves by appearing on weekly top global playlist charts?

Crucially: what does all of this mean for the solidity of valuations for music’s biggest companies?

And even more crucially… what does it mean for the veracity of Spotify’s paying audience as the company begins its high-stakes escalation towards the New York Stock Exchange?

Read the post on Music Business Worldwide

 

@Maureenmfarrell: Private Trades in Spotify Shares to Play Key Role in Upcoming Debut

[Recall that Spotify is not doing a traditional IPO, but something called a “direct listing.”  The difference between the two is a bit down in the weeds, but is crucial.  In a traditional IPO (sometimes called a “full commitment underwriting”) a group of investment banks or the equivalent form an “underwriting syndicate” that buys new shares from the company at a valuation set by the underwriters.  Hence the “pricing” concept for IPOs–you will hear that right before a new company starts trading.  If the path to an IPO has been managed correctly, the underwriters’ valuation is higher than the last private valuation of the company’s last sale of its preferred shares to private investors.

The underwriters want to price in a range that they can resell to retail investors, so they wouldn’t ever price at $1,000 for a stock that is to sell in the open market.  Think about it–how long did it take Amazon and Google to get to $1,000 in the open market?  They didn’t start there.

Another reason–which I suspect is the true reason–that Spotify is not going the underwritten IPO route is because they can’t get the valuation they want.  This may have something to do with another aspect I believe to be true–Spotify is not cracked up to be a public company.

Chris O’Brien in Venture Beat has a really insightful post on Spotify’s problems with valuations:

The reality is that by taking this route Spotify is pursuing a risky strategy. And it’s likely only doing so because it was backed into a corner by its investors and by private fundraising that led to a dangerously high valuation of $19 billion.

“This is not a story of problems in the IPO market,” according to Kathleen Smith, a principal at Renaissance Capital and manager of IPO ETFs. “It’s a problem with Spotify’s valuation.”

So let’s be honest–the reason why Spotify wants to trade publicly has a lot more to do with Daniel Ek’s misplaced ego than it does with any intrinsic value of his company.   And don’t forget–when the dust settles, it is his company and this was his idea.  Genius or goat, he will get the credit.

But of course Spotify’s “public or bust” approach is really designed to allow existing stockholders to cash out.  And here’s the twist–if you’re going to sell, someone has to buy.  And if you don’t have underwriters standing behind a price point, then there is no floor to the stock price if the sellers start running for the exits.

So–Spotify is trying to look to existing private market sales–very limited and nothing like public market sales–for guidance on its stock price.  (Private markets are sometimes called “secondary markets” where you can buy private company shares.)  Maureen Farrell in The Wall Street Journal has some reporting on this which is both murky and enlightening coverage of who Spotify is “managing” (some might say “manipulating”) its stock price already.  And if you wonder what running for the exits looks like, check out the VIX crash.]

Spotify AB is counting on its surging private-market value to bolster the music-streaming service’s appeal to investors in an unorthodox public debut that could be the biggest since SnapInc.’s $20 billion IPO last year.

The listing, expected as soon as the end of March, isn’t an initial public offering, in which underwriters set a price and place shares with chosen investors before trading. Instead, the Swedish company will simply float the shares on the New York Stock Exchange and let the market find a price, in what is known as a direct listing.

While Spotify and its advisers are still determining how exactly the process will work, the company and its banks are expected to have a role in helping guide the market to a price and connecting buyers and sellers initially, people familiar with the matter said. A suggested price range is expected to be relayed to the market before trading starts, but the price will ultimately be set by what buyers are willing to pay and the price at which sellers part with their shares.

Private trading is expected to be a key part of the company’s effort to guide the market to a price, people familiar with the matter said.

The so-called secondary markets in private technology stocks are typically an afterthought in an IPO, in part because trading tends to be thin and not always a reliable indicator of value. But Spotify and its advisers at Goldman Sachs GroupInc.,Morgan Stanley and Allen & Co. are closely watching trades among private investors and have taken steps to spur volume, the people said. The company recently informed existing investors that it waived its right to buy shares before they are offered to others.

Read the post on the Wall Street Journal

@hazelcills: This Writer [Lefsetz] Exposing #MeToo in the Music Industry Isn’t Your Hero

Bob Lefsetz, a former entertainment lawyer, has been writing the Lefsetz Letter for over a decade now. Typically a pretty inside-baseball view of the music industry with analysis, reviews, and awards show chatter, the Lefsetz Letter has gotten considerably more exposure in recent months because of how many women and men are submitting anonymous allegations of harassment to it.

In January, Lefsetz circulated a link to an open letter directed at Republic Records executive Charlie Walk written by Tristan Coopersmith, a former coworker who alleged sexual misconduct. Walk was placed on leave by Republic and Lefsetz is now facing legal threats for passing along the link to his readers. Readers continued to send Lefsetz emails alleging other misconduct from Walk as well as other anecdotes, anonymous or not, of sexual harassment in the industry, which Lefsetz then circulated through the newsletter.

In response, The Daily Beast published a glowing piece on Lefsetz’s work exposing sexual misconduct in the industry. It frames Lefsetz’s letter as the “first place” for women in the music industry to share their stories (despite the fact that several otheroutlets have also been covering the topic). “Bob is like an accidental hero,” guitarist Paula Franceschi tells the outlet. “He’s the kind of example we need out there, men stepping up for women.” But there’s no mention in the piece of the fact that, for years, Lefsetz has frequently written sexist statements about women’s bodies in ways that certainly contradict the depiction of him as “an accidental hero.”

Read the post on Jezebel

@andy_mc_donald: YouTube to roll out Red to 100 countries

As James Brindle recently posted, “Someone or something or some combination of people and things is using YouTube to systematically frighten, traumatise, and abuse children, automatically and at scale, and it forces me to question my own beliefs about the internet, at every level.”

But great news–now YouTube is delivering its dreck to 100 countries in a subscription package.  Here’s a few more fish stories from Susan Wojcicki:

susan-wojcicki

YouTube plans to roll out its subscription offering YouTube Red to around 100 countries this year, according to CEO Susan Wojcicki.  Speaking at the Code Media conference in California, Wojcicki described Red as “really a music service,” which it now plans to expand into many more markets after agreeing music licensing deals.

The service lets users watch or listen to YouTube content ad free, offline and in the background on mobile devices. Over the past two years YouTube has also invested in around 50 original series for Red.

Wojcicki explained that while YouTube started out by working with popular YouTubers on YouTube Red originals, it is now doing more around music, drama and other shows – adding this as a complement to what it now sees as fundamentally a music-focused offering.

Asked whether YouTube needs to buy a big company like Netflix or Spotify to up its content ambitions, Wojcicki said: “I think our goal is to continue to increase what we’re doing.”

“We are building that muscle of creating content; we’ll continue to do more and more and we’ll see what’s successful, we’ll see what our users respond to, what’s driving subscriptions, what’s being watched. I think one of the really amazing things about YouTube is the platform and the data that we have.”

Read the post on Digital TV Europe

@edchristman: Songwriters Gain Influence in How the Music Modernization Act Would Work

[Editor Charlie sez:  This tinkering with the board seats changes the songwriter vote from 2/10 to 4/14, a change from 20% to 28% on the new collective created by the MMA, aka the self-licking ice cream cone.  This board structure is still wildly out of sync with every other creator collective in the world and will no doubt be opposed by ex-US writers.  Remember–the MMA covers all songs ever written or that ever will be written, including both US and ex-US works exploited in the US.  If the last compulsory license is a guide, the MMA will last 100 years after the Spotify IPO.  And still does nothing to police the mass NOIs that are filed every day.  But good news about extracting support for Google-opposed Copyright Small Claims Court.]

What the law ultimately says is up to members of the House and Senate, who will write the legislation and the subsequent regulations, but in the meantime, negotiations…have resulted in a proposal that allows songwriters and composers to have four seats on the now-expanded 14-seat board of directors, instead of the initially allotted two seats for songwriters on a smaller 10-seat board; while the unclaimed royalties oversight committee will now be evenly divided between publishers and songwriters. It also has resulted in additional clarifications to how payouts from unclaimed funds are distributed.

While the…the NSAI and SONA…had already come out in favor of the proposed legislation, the Songwriters Guild Of America initially withheld endorsing the legislation, saying it had some reservations about elements of it. But now SGA president Rick Carnes says his group is on board….

As part of the proposed changes, Carnes says that exclusionary clauses in older songwriter/publishers contracts sometimes prevent songwriters from collecting royalties because that clause allows publishers to take the stance that they don’t have to share the money with songwriters if it comes in unattributed to a song. “We tried to clarify that language so songwriters can get their fair share,” Carnes says.

In another move, as part of the negotiations with songwriters, the publishing community has “pledged to lend its full support on Capitol Hill to secure quick passage” of the pending Copyright Alternative In Small-Claims Enforcement (CASE) Act of 2017, which will provide music creators with an alternative to a full blown copyright infringement actions against unlicensed users of music.

Read the post on Billboard

 

Historic Coalition of 213 Musical Artists Calls on Congress to Pass CLASSICS Act — The Trichordist

[Editor Charlie sez:  The consensus behind the CLASSICS Act demonstrates just how unready for prime time is the Music Modernization Act.  If we’re not going to stand behaind Chairman Nadler’s Fair Play Fair Pay, the CLASSICS Act deserves a chance to stand alone and not be tied to the punitive and controversial Music Modernization Act.]

The 1976 copyright act federalized copyrights for post 1972 sound recordings. Sound recordings made pre-1972 were covered and remain covered by state copyright laws. The 1976 act did not strip the works of copyright protection. Several years ago digital broadcasters and non-interactive streaming services all decided (simultaneously) that the Digital Performance Right in Sound Recordings Act […]

via Historic Coalition of 213 Musical Artists Calls on Congress to Pass CLASSICS Act — The Trichordist

@hypebot: @bandcamp Reports ‘Stellar’ 2017, Indie Revenue Up 73%

[Editor Charlie sez:  Songwriters should note the increase in digital and physical sales and remember that the last rate hearing continued to freeze mechanical royalties on physical and permanent downloads at 9.1 cents minimum statutory–where it has been set since 2009 and will remain until 2022.  Inflation alone would peg that rate at 11 cents  today, if it hadn’t been frozen and increases for inflation just keeps the rate the same.  So what that really means is by freezing the rate at 9.1 cents in 2009, the rate has actually decreased for inflation.  That means that the mechanical rate has actually decreased by approximately 20% since 2009.]

Bandcamp is reporting a record year for 2017.  Here are some highlights:

  • Digital album sales were up 16% vs. a 20% industry decline)
  • Track sales up 33% vs. a 23% industry decline
  • Merch sales up 36%.
  • Growth in physical sales was led by vinyl (up 54%)  and CD sales up 18%

“Meanwhile, standalone music streaming companies continued to lose money in 2017,” the company wrote in a blog post chronicling its “stellar” year. ” The seemingly inevitable upshot of these two trends is that the majority of music consumption will eventually take place within the subscription rental services of two or three enormous corporations, who can afford to lose money on music because it attracts customers to the parts of their businesses that are profitable.”

Read the post on @hypebot