Music Labels May Have Paid $14,000 for 18 Percent of Spotify

Though other reports claim the sum to have been considerably higher

By on August 7th, 2009 13:31 GMT
Spotify has been getting its fair share of attention lately and for good reason as it has achieved what has almost become mythical for music streaming services. It's loved by its users, it's making money, it's getting serious investments and, perhaps the most important thing, it's backed by all of the four major labels. This last part has eluded countless competitors, but how exactly has it managed it? Well it depends on who you choose to believe.

Swedish news site ComputerSweden is now saying (in Swedish) that the secret behind the support is the fact that the big four music labels, Sony BMG, Universal Music, Warner Music and EMI, were allowed to invest in the company early on for very little money. The four labels, along with Merlin, a non-profit organization, set up to handle licensing for a large number of small independent music labels and got about 18 percent of the company for 100,000 SEK ($14,000). This, as recent as October 2008, and for a company that is now being valuated at $250 million. The low entry fee is believed to be part of the reason why the music labels backed the project and thus part of its success.

TechCrunch though has another take. Based on several sources the tech blog claims that the music labels got the same price as all of the other initial investors. A filing that was reportedly presented in Luxembourg, where the company has its HQs, shows the current shares of the major investors and what they paid for them. Sony BGM would be the biggest shareholder of the music labels, with 5.8 percent, followed by Universal Music with 4.8 percent, Warner Music with 3.8 percent, EMI with 1.9 percent and finally Merlin with 1 percent. This adds up 17.3 percent close to the 18 percent put forward by the Swedish magazine.

Now comes the strange part; while the report shows that the labels' contribution would add up to about 8,800 Euros, TechCrunch believes this may be an inaccuracy, with the correct sum actually being 8.8 million Euros, based on the sources that claim that the labels paid the same as the other investors. Whatever the case, it's now clear that the music labels’ support has largely benefited the company, which is now set to take over the US. 

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