Warner Bros Music cashes out of Spotify; how much will musicians see?

Earlier this year, Warner Brothers Music announced it would be selling off 75% of its stake in Spotify, a move that brought the company some $400 million.

It wasn’t any big secret that three of the biggest names in the music industry – Warner, Sony and Universal – owned something like 18% of all Spotify shares, but in reality it was a smaller portion than that. Variety reported that Sony owned some 5.7% of Spotify, with 4% split between Warner and Universal.

But on August 7, Warner announced it was selling off everything, getting out of its ownership portion of Spotify altogether, to the tune of half a billion dollars —$504 million, to be precise, or $317 million after taxes. That’s not a small payday by any stretch of the imagination.

Warner also announced it was “not ignoring unrecouped balances,” meaning the vast majority of the cash it received for the sale will stay within the company in order to chip away at money paid in advance for label expenses like recording, production, distribution, etc.

Warner is still a powerhouse in the music industry, so it’s only natural to ask whether this influx of cash will eventually trickle down to the artist that helped put Warner in that position. After all, is there a music industry without musicians? (On second thought, maybe don’t answer that.)

Some 25% of the money, roughly $126 million, will be paid to musicians on Warner and ADA-distributed labels. Musicians will see a little extra (or a lot, in some cases) in their June 30 royalty payments, which will go out between August and September.

Music Business Worldwide reiterates Warner’s previous statement that it is “only sharing Spotify proceeds with its partner labels when obligated to do so by individual contracts.”

In comments to shareholders, Warner Music Group CEO Steve Cooper said “Just so there won’t be any misinterpretation about the rationale for our decision to sell, let me be clear: We’re a music company, and not, by our nature, long-term holders of publicly traded equity,” he said. “This sale has nothing to do with our view of Spotify’s future. We’re hugely optimistic about the growth of subscription streaming.”

Warner isn’t the only company walking away from Spotify, the very popular but not very profitable streaming service. Sony also sold about half of its shares, earning it some $750 million, while indie collective Merlin divested 100% of its shares and earned $125 million earlier this year. Only Universal still has ownership of its shares.

Sony had previously announced it would share some proceeds of its sale of Spotify shares with indie labels, but at the time it was not determined how those profits would be shared.