All posts in “Entertainment”

Here’s why Spotify will go public via direct listing on April 3rd

Spotify explained why it’s ditching the traditional IPO for a direct listing on the NYSE on April 3rd today during its Investor Day presentation. With no lockup period and no intermediary bankers, Spotify thinks it can go public without all the typical shenanigans.

Spotify described the rationale for using a direct listing with five points:

  • List Without Selling Shares  – Spotify has plent of money with $1.3 billion in cash and securities, has no debt since it converted that into equity for investors, and has positive free cash flow
  • Liquidity – Investors and employees can sell on public market and sell at time of their choosing without investors shorting a lockup expiration, while new investors can join in
  • Equal Access – Bankers won’t get preferred access. Instead, the whole world will get access at the same time. “No underwriting syndicate, no limited float, no IPO allocations, no preferential treatment”.
  • Transparency – Spotify wants to show the facts about its business to everyone via today’s presentation, rather than giving more info to bankers in closed door meetings
  • Market-Driven Price Discovery – Rather than setting a specific price with bankers, Spotify will let the public decide what it’s worth. “We think the wisdom of crowds trumps expert intervention”.

Spotify won’t wait for the direct listing, and on March 26th will announce first quarter and 2018 guidance before markets open. It also announced today that there will be no lock-up period, so employees can start selling their shares immediately. This prevents a looming lock-up period expiration that can lead to a dump of shares on the market that sinks the price from spooking investors.

It’s unclear exactly what Spotify will be valued at on April 3rd, but during 2018 its shares have traded on the private markets for between $90 and $132.50, valuing the company at $23.4 billion at the top of the range. The music streaming service now has 159 million monthly active users (up 29 percent in 2017) and 71 million paying subscribers (up 46 percent in 2017.

During CEO Daniel Ek’s presentation, he explained that Spotify emerged as an alternative to piracy by convenience to make paying or ad-supported access easier than stealing. Now he sees the company as the sole leading music streaming service that’s a dedicated music company, subtly throwing shade at Apple, Google, and Amazon. “We’re not focused on selling hardware. We’re not focused on selling books. We’re focused on selling music and connecting artists with fans” said Ek.

Head of R&D Gustav Soderstrom outlined Spotify’s ubiquity strategy, opposed to trying to lock users into a “single platform ecosystem”. He says Spotify does “what’s best for the user and not for the company, and trying to solve the users’ problems by being everywhere.” That’s more shade for Apple, who’s HomePod only works with Apple Music despite customers obviously wishing they could play other streaming services through it.

By now being baked into a wide range of third-party hardware through the Spotify Connect program, Soderstrom says Spotify gets a more holistic understanding of its listeners. He declared that Spotify has 5X as much personalization data as its next closest competitor, and that allows it to know what to play you next. He cheekily calls this “self-driving music”.

By directing what people listen to, Spotify becomes the new top 40 radio — the hit-maker. That gives it leverage over the record labels so Spotify can get better licensing deals and favorable treatment. Now over 30 percent of Spotify listening is based on its own programming through featured playlists, artists, and more.

Spotify CEO Daniel Ek giving the Investor Day presentation

Wall Street loves a two-sided marketplace, so Spotify is positioning itself in the middle of artists and fans, with each side attracting the other. It’s both selling music streaming services to listeners, and selling the tools to reach and monetize those listeners to musicians. That’s both on its platform, and using its targeting and analytics info to deliver efficient ticket and merchandise promotions elsewhere. Ek discussed the flywheel that drives Spotify’s business, explaining that the more people discover music, the more they listen, and the more artists that become successful on the platform, and the more artists will embrace the platform and bring their fans.

Yet with music catalogues and prices mostly similar across the industry, Spotify will have to depend on its personalized recommendations and platform-agnositic strategy to beat its deep pocketed competitors. Music isn’t going away, so whoever can lock in listeners now at the dawn of streaming could keep coining off them for decades. That’s why Spotify not raising cash for marketing through a traditional IPO is a strange choice. But with its focus on playlists and suggestion data, Spotify could build melodic handcuffs for its listeners who wouldn’t dream of starting from scratch on a competitor.

You can follow along with the presentation here.

For more on Spotify’s not-an-IPO, check out our feature piece:

Spotify tests native voice search, groundwork for smart speakers

Now Spotify listens to you instead of the other way around. Spotify has a new voice search interface that lets you say “Play my Discover Weekly”, “Show Calvin Harris”, or “Play some upbeat pop” to pull up music.

A Spotify spokesperson confirmed to TechCrunch that this is “Just a test for now”, as only a small subset of users have access currently, but the company noted there would be more details to share later. The test was first spotted by Hunter Owens.

Voice control could make Spotify easier to use while on the go using microphone headphones or in the house if you’re not holding your phone. It might also help users paralyzed by the infinite choices posed by the Spotify search box by letting them simply call out a genre or some other category of songs. Spotify briefly tested but never rolled out a very rough design of voice controls a year.

Down the line, Spotify could perhaps develop its own voice interface for smart speakers from other companies or that it potentially builds itself. That would relieve it from depending on Apple’s Siri for HomePod, Google’s Assistant for Home, or Amazon’s Alexa for Echo — all of which have accompanying music streaming services that compete with Spotify.

Spotify is preparing for a direct listing that will make the company public without a traditional IPO. That means forgoing some of the marketing circus that usually surrounds a company’s debut. That means Spotify may be even more eager to experiment with features or strategies that could be future money-makers so that public investors see growth potential. Breaking into voice directly instead of via its competitors could provide that ‘x-factor’.

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For more on Spotify’s not-an-IPO, check out our feature story:

YouTube TV pricing goes up by $5/month starting tomorrow

YouTube TV has grown quite a bit since its launch in April of last year. The service now has more than 300,000 users, according to a report, and is available in nearly 100 markets.

That said, the service is raising prices tomorrow. Which means today is the last day you can subscribe to YouTube TV for $35/month.

The price hike was announced last month, as the company plans to add more channels to the live streaming service. And, as a result, YouTube TV is going from $35/month to $40/month.

YouTube TV launched with a wide variety of programming from networks such as ABC, CBS, FOX, NBC, CW, ESPN, AMC, FX, FXX, Disney Channel (plus Disney Jr. and XD), E!, USA, Bravo, Syfy, MSNBC, Telemundo, Sprout, Freeform, NatGeo and more. In February, the service added Turner-owned networks, including TNT, TBS, CNN, Cartoon Network, Adult Swim, HLN, truTV and Turner Classic Movies, along with NBA TV and MLB Network.

Folks who have already subscribed to YouTube TV or do so today will be grandfathered in to the $35/month pricing.

While YouTube TV continues to grow, the service faces steep competition by VOD streaming platforms like Netflix and Amazon Prime Video, as well as Hulu with Live TV, which is said to have 450,000 pay subscribers.

Facebook and Warner Music ink recorded and published music deal for videos and messages

Just weeks after signing a large licensing deal with leading indy label representative ICE, Facebook has continued its march into the world of music with the news that it has now added Warner Music Group into the mix, the last major label that was not yet working with the social network.

Facebook has signed a wide-ranging licensing deal that covers all of Warner Music’s recorded and published music catalogs. Music from these can now be used in “social experiences” on Facebook, Instagram, Messenger and Occulus. (WhatsApp for now is not included.)

The list of artists in the Warner stable is massive: it includes iconic names like the Eagles and early Madonna (pre 2010) through to Ed Sheeran, Nina Simone and Jay-Z.

Facebook has been working on a more comprehensive music licensing policy for months, some believe as it gears up to take a bigger step into music services itself.

But before anything like that can even be considered, though, it has had to sort out royalties around music that appears on Facebook already. A Warner spokesperson confirmed to me that it’s not disclosing any terms. But reports have estimated that the prices of these deals are in the hundreds of millions of dollars to cover Facebook’s 2.1 billion registered users.

Warner was the last big hold-out among the world’s “big three” biggest labels, alongside Sony and Universal Music, which had yet to sign on to working with Facebook, something it highlighted when commenting on today’s deal.

“The team at Facebook is creating a truly innovative product and is showing real commitment to its participation in the growth of the music business,” said Eric Mackay, EVP, Global Digital Strategy, Warner/Chappell, in a statement. “We’ve taken our time to arrive at the best possible deal, one that recognises the value that music creates on social networks, while empowering our songwriters to reach audiences around the world, in a way that will spark creativity and conversation among their fans. Our incredible catalogue of songs will be represented throughout Facebook’s platforms and we’re excited to work together to create new opportunities for both our songwriters and Facebook’s users.”

In addition to Warner/Chappell, labels associated with WMG include Asylum, Atlantic, Big Beat, Canvasback, East West, Elektra, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Rhino, Roadrunner, Sire, Warner Bros., Warner Classics and Warner Music Nashville.

This is a very significant deal: it will mean that Warner Music will now be able to collect royalties on tracks that are used in videos and messages; and those posting content on Facebook and its network of social sites will be doing so in the legal clear.

For now, this covers just organic content from consumer users, but it sounds like the two will also be exploring how to bring this into advertising and other paid posts as well.

“Under the partnership, WMG and Facebook will continue to work together to develop new products that enable users to personalize their music experiences across Facebook, Messenger, Instagram and Oculus,” Warner said in a statement, with the commercial aspect highlighted specifically by Ole Obermann, Warner Music Group’s Chief Digital Officer.

“Our partnership with Facebook will help expand the universe of music streaming and create supplementary revenue for artists,” he said. “Fan-created video is one of the most personal, social and often viral ways that music is enjoyed, but its commercial potential is largely untapped. This collaboration will lead to new possibilities for our artists, while enhancing the user experience across Facebook, Instagram and Oculus, and enabling people to communicate and express themselves using the music they love.”

This is the latest in a string of music partnerships that Facebook has signed in recent months. Others include an agreement with Universal Music Group over user-generated videos; a deal with Sony/ATV; and a licensing deal with Kobalt, HFA/Rumblefish and Global Music Rights.

Separately, Facebook also has also pursued a secondary route of giving creators access to “no-name” music via a new service it’s launched called Sound Collection.

Facebook has so far declined to comment on its longer-term ambitions in the world of music, but it has long been rumored to be interested in building its own streaming service, along the lines of Spotify, Pandora, and Apple Music.

More generally, as Facebook has faced a drop-off in user growth in mature markets, it’s been looking for more ways to engage those users it already has, in competition with a plethora of rival social media services and dozens of other digital distractions, from Netflix to games to fiddling with your smart home appliances.

As Spotify — which is now preparing to go public — has shown, there is a lot of potential customer loyalty and scale in building successful standalone streaming services. It could be that Facebook is taking a page from that playbook and sees music as one potential way of helping to strengthen its own community efforts — community being the keyword at Facebook these days

“When Facebook and music come together, we have the power to bring people closer together,” said Tamara Hrivnak, Head of Music Business Development and Partnerships, Facebook, in a statement. “Music brings to life the happy, the sad, the throwback and the funny in all the moments and messages we share with friends. We are delighted to partner with Warner, its artists and songwriters, and welcome them to our platforms.”

We’ll update this post as we learn more.

HTC debuts original Ready Player One content for the Vive

While some don’t care for the hit novel Ready Player One, it’s hard to deny that the book captured the hearts and minds of millions as it climbed the NYT Bestseller’s list in 2011.

At the end of this month, a film adaptation of the book, directed by Stephen Spielberg, will be released in theaters.

And given the book’s heavy focus on VR, it makes sense that HTC wants to get in on the action with the Vive. The company is announcing eight pieces of virtual reality content, which will be available on the Vive and at IRL VR arcades, free to download on Viveport and Steam.

Folks attending SXSW can also get in on the action with the content debuting at the festival.

Here is the content Vive owners have to look forward to:

  • Battle for the Oasis developed by Steel Wool Studios
  • Rise of the Gunters developed by Drifter Entertainment, Inc.
  • Gauntlet developed by Directive Games
  • Smash developed by 2 Bears Studio
  • Fracture developed by 2 Bears Studio
  • Aech’s Garage developed by Sansar
  • The Distracted Globe Music Experience in TheWaveVR developed by TheWaveVR
  • Ready Player One: Avatar Creator developed by Morph3D

You can learn more about each of these titles here.

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