RikiMusic is pirating dozens of articles from Hypebot as well as allegedly uploading tracks from indie artists to Spotify and Amazon Music without authorization….
Caleb Jackson Dills, who first wrote about the music theft for Artists Rights Watch, also noticed that the content on the RikiMusic blog looked familiar.
Virtually all of the dozens of posts on the RikiMusic site were pirated directly from Hypbot.com and illegally published verbatim without attribution.
UPDATE: This post originally appeared on 9/24 in MusicTech.Solutions before reading that on 9/23 Wells Fargo initiated coverage of Spotify at “Underperform” with a $115 price target. (The stock touched $115 during the trading day on 9/24). As of this writing, the consensus price target is $159 according to NASDAQ’s Marketbeat. And of course, streaming’s massive consumption of electricity is becoming an issue faster than you can say “data center.”
Analyst Mark Hake has developed three different scenarios for where Spotify’s stock price will be in 2021: $125.68, $61.42 and $38.39. He assigns a $114.89 price based on a probability analysis. About where it is at the close today, in other words. His post in Seeking Alpha (“Spotify Has A Valuation Problem”) is a must read if you’re interested in financial analysis. (I predicted about a year ago the stock would retrace to the $120 to $130 range before dropping below $100 and that it would happen sooner than later.)
As analyst BNK Invest noted after the close last Friday (9/20):
In trading on Friday, shares of Spotify Technology SA (Symbol: SPOT) entered into oversold territory, hitting an RSI reading of 26.8, after changing hands as low as $120.63 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 56.4. A bullish investor could look at SPOT’s 26.8 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
This chart is from today’s trading and it reveals a couple interesting patterns–they may mean nothing, but then again they might. It’s not so much that Spotify is now trading about $20 below its self-assigned private company valuation of $135. That’s not a comfortable feeling as it says that investors would have been $20 a share better off if the company had never had its controversial direct public offering (or “DPO”) and just stayed private.
What’s interesting about this chart is not so much the price but rather the volume. Spotify is a very thinly traded stock that typically has relatively low volume. When you see larger volume around the opening and the close of trading it may indicate certain motivations of sellers. Particularly if there are holders of large blocks of shares that want to slip out of their position when nobody is (a) noticing or (b) can do much about it.
Because of the nature and “rules” of the DPO, Spotify doesn’t have the typical underwriting syndicate that helps to keep the price somewhat stable to allow the stock to establish a trading range with support levels. Instead of the underwriters selling to the public, Spotify insiders are selling their shares to the public, which then of course can be resold. In an underwritten public offering, insider shares are usually subject to a “lock up” period where insiders cannot sell their shares for a period of time, say 90 to 180 days after the first public offering.
Spotify had no lock up on insiders. So who has an incentive to sell their shares relatively quickly?
It’s hard to know who is doing the selling unless you’re a transfer agent with access to the master shareholder list, and they probably wouldn’t disclose that information for anyone under certain thresholds. But it is odd and it’s been similar patterns for a week or so.
Chris Castle discussion of Eight Mile Style lawsuit against Spotify under Music Modernization Act (driving with dogs series, a One Take Wonder Production)
On June 24th, Spotify shares (ticker: SPOT) was downgraded by Evercore analyst Kevin Rippey, who cut the stock to Underperform from In Line. Since then, analysts are steadily looking past the loss-making Spotify’s $1 billion stock buy back plan.
Rippey says investors are overestimating Spotify’s ability to make money from podcasts and offering services to musicians and are underestimating the competition from other streaming services—particularly in countries outside the U.S. He reduced his price target to $110.
As ARW readers will recall, I have long challenged Spotify’s kvetching about high royalty rates by pointing to the its high overhead, 7 figure performance bonuses to Daniel Ek when he failed to meet the bonus criteria, and other irresponsible behavior by the board that Ek controls.
Spotify’s interest in podcasts is another comical example of Ek as the Easter Bunny of Screw Ups. He bought a podcasting company that was unionized. Sheer genius. Why did he buy them? Some people think it’s because podcasts were another form of user-generated content where people work for free in exchange for hot meals…no, in exchange for exposure bucks.
Apple is busy paying for podcasts according to Newsmax:
Apple Inc. plans to fund original podcasts that would be exclusive to its audio service, according to people familiar with the matter, increasing its investment in the industry to keep competitors Spotify and Stitcher at bay.
Executives at the company have reached out to media companies and their representatives to discuss buying exclusive rights to podcasts, according to the people, who asked not to be identified because the conversations are preliminary. Apple has yet to outline a clear strategy, but has said it plans to pursue the kind of deals it didn’t make before.
Apple all but invented the podcasting business with the creation of a network that collects thousands of podcasts from across the internet in a feed on people’s phones, smartwatches and computers. The Apple Podcast app still accounts for anywhere from 50% to 70% of listening for most podcasts, according to industry executives.
So Spotify’s law fare against Apple in Europe should come as no surprise (for more on that subject see the “Spotify Untold” corporate bio book). What this comes down to is that once again, Apple understands its audience and what would delight them where Spotify wants to build them a faster horse (or at least a cheaper one).
Meanwhile, Spotify is commoditizing music into a “playlist friendly” environment based on your mood rather than being artist driven. Why? One possible reason is the psychographic research of Michael Kosinski, whose work formed the basis for techniques honed by Cambridge Analytica and the Internet Research Agency you hear so much about (although it must be said the Kosinski did not work for either of those outfits–no he works as a professor at…you guessed it…Stanford). See his paper The Song Is You: Preferences for Musical Attribute Dimensions Reflect Personality, available at the Leland Stanford Google University Business School.
The more insightful analysts are represented by Mr. Rippey, who seems to have a good grasp on Spotify’s business and sees through all the bright and shiny objects they want you to focus on as reported by Barrons (emphasis mine):
Rippey says Wall Street’s expectations assume that either the company will come out way ahead in negotiations with the music labels that control the vast majority of the content that Spotify streams, or that it will make a bundle of money from services that previously accounted for almost none of its income.
Now that the sugar high of the Spotify stock has passed through the system and artists either are happy or not happy with their share of the proceeds–which will be hitting royalty statements right about September 30–labels are now faced with a second act, and that second act likely will require a bigger royalty check–not a smaller one.
To achieve Wall Street’s targets for gross profit, Spotify would either need to take a larger cut of proceeds from each song stream [also called a lower royalty to artists and songwriters] or generate as much as $650 million from “ancillary” areas like Spotify for Artists and podcasts by 2022—areas the company doesn’t make much money on today, Rippey says. Spotify for Artists offers data for musicians to track which songs are performing well and in which areas, among other benefits. [Which is OK if Spotify for Artists is free, I guess–since we sent them the fans–but my bet is that no one is going to pay for it, certainly no one with a modicum of leverage.] Spotify makes money from ads on podcasts it owns and has also begun to launch exclusive podcasts that listeners can only get on Spotify. [Spotify has never had a hit that originated entirely within Spotify. When it does, check this space.]
Given that music crosses over multiple cultures but that Spotify brings a decidedly European and Anglo/American creative viewpoint to its distribution platform, it is unlikely to be able to fight all fights in all markets and be all things to all music fans in the some 60 countries it operates in. This is particularly true in countries that actually value their culture and creators.
Spotify is the global leader in streaming music, but Rippey thinks that Wall Street overestimates the company’s power in local markets. “In emerging markets like India, local players dominate the market,” he writes, noting that Jio and Gaana were the market leaders there in the first quarter. “This fragmentation leads to an understatement of how competitive streaming music is globally.” Similar dynamics play out in countries like Indonesia too.
Those are some good concrete reasons why Rippey’s price target is $110, which I think is still about $50 too high because of Spotify’s C team management. And also because the other analysts are all guiding too high in the Overton Window:
|Evercore/Kevin Rippey||Underperform (From In Line)||$110|
|Nomura Instanet/M. Kelly||Buy||$190|
|Credit Suisse/B. Russo||Underperform||$120|
|BOA/Jessica Reif Ehrlich||Buy||$230|
One major factor that all the analysts overlook, like they missed the subprime crisis, is buried in the commentary that never gets picked up in the Wall Street publications–the fact that artists can’t begin to make a living from streaming the way they could from the CDs that streaming is replacing. This sudden contraction hurts artists at all stages of development. To put it in terms that Wall Street might understand more readily, this is a supply chain issue. The chain will have no supply if unsustainable economics expands which it seems like it will.
There’s about 5% of the tracks that make 90% of the revenue from Spotify-type streamers. Fans are paying subscriptions every month for music they don’t listen to performed by artists they don’t like. When that idea starts to permeate the Federal Trade Commission and the Department of Justice, who knows what may happen. This will be true of podcasters, too–the unionized podcasters affiliated with the Writers Guild of America. I’m looking forward to that collective bargaining experience.
But for now, it’s only a matter of time before artists who are not in that 5% start to jump ship. Analysts should be asking, who can encourage them to jump and what will happen to the ship they jump from if there were some disruption below decks in the royalty rates?
Playlistomania? I wonder what it is on Spotify–that’s what 50 million tracks will do for you. If this replicates to “listener paralysis” (which seems plausible), it may help explain why the streaming revenue share model leads to declining royalty rates and greater concentration of wealth in a hyper efficient market share distribution. (Deezer reportedly conducted a similar study in 2018 using a casual poll with findings based more on age than choice.) Less is more, kids, less is more.
Nielsen’s new Total Audience Report found that the average TV viewer takes seven minutes just to pick what to watch….[A]mong adult subscription-video-on-demand (SVOD) users, only a third of them bother to browse the menu to find content, with 21 percent saying they simply give up watching if they’re unable to make a choice when bombarded with options.
The majority of people who champion streaming are not your average artist, they are not even the top 10 per cent of artists. The advocators of the commentary we hear day to day are music industry press, mainstream press, the streaming networks themselves, aggregators and Digital Service Providers (DSPs) and of course users, who get an amazing experience of all the music in the world for 9.99.
Ah, Cancun, where the elite meet and the US Consulate is located next to the jail.
Spotify is currently hosting a pricey offsite meeting in Cancun, Mexico, with dozens or more executives and employees participating.
Of course, Cancun isn’t usually associated with getting work done — unless that work involves repeatedly lifting rum cocktails. But this offsite is reportedly focused on assembling content groups from various global offices. Beyond that, we’re not sure of the exact business purpose.
One Spotify executive referred to this as a ‘Spotify Music Conference’. Another source noted that the ‘entire content org’ at Spotify is attending the getaway. Sounds like a lot of people.
There seems to be a strong Latin emphasis among the performers (more on that below), which makes sense given the location. But at this stage, this looks like a broader global content and curator meet-up.
According to one source, the action is happening at the Ritz Carlton Cancun, which is surrounded on all sides by white-sand beaches and light blue waters. According to the resort’s website, room prices start at $439 a night for an ‘Ocean View Guest Room,’ and quickly climb to $1,329 a night for the spacious ‘Club Master Suite’.
Two of the artists performing at the Spotify soiree…sorry, I mean working conference… are Nicky Jam and ChocQuibTown. What’s strange about that is that Spotify can’t seem to find the songwriters for these two artists:
Now Spotify can explain to these artists why their songwriters aren’t getting paid. Good thing we have that Music Modernization Act safe harbor that will put everything right as rain.