Will Spotify IPO Show Managers and Artists Got Options and Stock? Who Will Get Legal Scrutiny?

I can’t wait for the Spotify IPO filing.  That’s when Spotify must disclose all kinds of things.  Like which artists, artists representatives and managers  got stock options.

It’s  entirely possible that a bunch of artists and managers are gonna find themselves on the wrong end of the Securities and Exchange Commission’s pointy stick.

Why? When you present yourself as an expert in the music business and sing the praises of a music business company  going public  without disclosing that you have a financial stake you can end up in a lot of trouble.

Those managers, artist representatives  and artists who have been blogging or writing guest editorials  concerning the financial viability of Spotify and streaming  have the biggest problems.  An attorney can argue that they were part of a conspiracy to defraud investors if the company goes belly up because it has no viable business model.

Even those that spoke at the invitation-only Spotify meetings the last few weeks may be in trouble as well. There may have been  potential investors  in the room or what was said may get repeated to potential investors.  The SEC doesn’t like it when you don’t disclose your financial stake in those situations public or private.

If someone somewhere knows that the company is a piece of shit this is PUMP AND DUMP and then EVERYONE gets investigated. And if you didn’t disclose your financial stake in the company? You’re gonna look guilty whether you are or not.   Might as well put a big target on your back.

Shit, you may be in trouble if you took anything of value from Spotify?  Data? Promotion?  Promise of a job?

Doesn’t matter how smart you may think you are,  it just takes one idiot to screw it up for everyone.

So how do we know that Spotify is gonna tank?  Do the math.   $5 a month streaming subscription even at 100 million households (the penetration of cable and satellite)  70% of revenue to rightsholders means that recorded music is a $4.2 billion dollar business.  That is mass adoption of Spotify shrinks the business dramatically from it’s current 7 billion.  THIS IS SIMPLE MATH AND ANY EXECUTIVE WHO CAN”T DO THIS MATH SHOULD BE FIRED.

But it is highly unlikely that all the streaming services put together will ever reach that level of paid subscriptions.   Why?   they offer a free version.   Why would 100 million subscribers pay for something they get for free?  It’s more likely that streaming creates a much more dramatic drop in recorded music revenue.

Do you think someone like  Lucian Grainge is gonna let his revenue get cut in half? or worse?  No he isn’t.  Therefore Spotify in it’s current incarnation and model dies.  If you don’t want to be investigated by the SEC you better hope that this happens before the IPO.

We also believe (we have access to Soundscan too!) the widely reported dramatic drop in paid downloads radically understates the problem to record labels. Digital downloads have a higher “net” to the recorded music business than physical sales.  Physical sales have much higher expenses associated with their manufacture, distribution and delivery.   Outside of the magic unicorn land of Silicon Valley, profits do matter.  And profits are gonna get nuked this year.  This means real job cuts and real salary reductions.

Finally we should mention we had  moles in many meetings on the recent Spotify roadshow.  Including the manager only meetings.  WE KNOW WHO ATTENDED AND WHAT WAS SAID.  This could really end up being a shit show.

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Later this week:  How  record executives may be PERSONALLY  liable in potential lawsuits that argue that artists were defrauded in the deals labels cut with Spotify.

 

 

 

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