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Spotify Officially Goes Public, Record Labels Left With Questions About The Future

As Spotify trading begins, labels fret over when to sell. 

"What message are we sending if we start dumping shares and tell everybody about it," asks one executive.
As Spotify shares begin trading on the New York Stock Exchange, the major record companies are wrestling with some thorny questions: when to sell their stock, and how to divvy up the proceeds among their artists and indie-label partners.

How soon to start selling is a puzzle for the three labels, which each took equity as part of their licensing deals that allowed Spotify to launch in the U.S. in 2011. With 71 million paying subscribers worldwide, Spotify revenue is now underpinning double-digit industry growth, despite the service losing money itself, and some label executives worry that selling early could signal a lack of confidence in Spotify's long-term prospects and impact share price and industry health when their sales become known. The stakes held by Universal Music Group and Warner Music Group are just about 4 percent and are now worth about $900 million; Sony's slightly larger 5.7 percent stake is worth nearly $1.3 billion, at a price of $125 a share.

On the other hand, if the majors don't sell early on and the price eventually declines, artists and label partners may second guess their investment decisions. "What if that happens and they accuse us of playing a dangerous game and start questioning if the label was gambling with their money," another major label executive wonders. "The majors might be better off with a clean situation and take the money off the table now, this way everything is above board and transparent."

An even trickier question is how to divide up the proceeds with artists and distributed labels once the stock sales are made. All three majors have said they will share earnings with their artists, and indie trade groups like A2IM and WIN have pressured the majors to say they would share profits with their indie distributed labels, so that those labels could share with their artists. Some major-label executives say their initial seeming reluctance to speak on the issue had more to do with how to divide the equity earnings among them.

Warner Music Group still hasn't commented on the issue, but Sony recently said in a statement that "Sony Music and The Orchard are committed to sharing with their artists and distributed labels any net gain they may realize from a sale of Sony Music's equity stake in Spotify. This is consistent with our previously announced policy of sharing breakage and equity proceeds from digital catalog licenses with our artists and distributed labels." UMG now says that "UMG's approach to sharing with artists any proceeds of an equity sale also applies to distributed artists and labels, consistent with the terms of their agreements with UMG."

But it's not clear how they will do it, especially since labels' rosters have changed considerably since each took its Spotify stake.

Among the questions on the table: How do you pay an artist who might have been generating a lot of streams when the label first got the shares, but isn't streaming at all nowadays? "How do you calculate that?" wonders one major-label executive. Do artists who signed after the label negotiated for and received shares of Spotify deserve a share of the proceeds? "What do you do with artists that have left the labels?" ask another label executive.

And what about the songwriters? Sources indicate that the publishing companies of the majors did not receive any equity at the time of the licensing negotiations, so writers who don't perform their own songs are unlikely to benefit.

Meanwhile, equally thorny questions also have to be resolved for distributed labels. Some indie labels may have negotiated for breakage -- their fair share of proceeds from equity as well as advances -- so they would get paid from a stock sale. But others might have brought that topic up only to negotiate it away in exchange for better distribution terms, and wouldn't be getting anything, sources say.

What about those labels that didn't negotiate anything on the Spotify issue, how will they be treated? Do Sony and UMG have to share with an indie label that was with them when they received shares but has since left? Do they have to share with labels who signed distribution deals well after the majors obtained their Spotify stakes?

"For both the artist and the distributed labels, there are so many prisms to look at this issue through, whatever you do you are setting yourself up for a lawsuit, if someone thinks they are being treated differently than another artist or label," says one major-label source. "It's a highly complicated situation. We might need to go out and find an independent third party who is seen is objective and fair to come up with the fairest way to proceed with how to share these funds."

While who should get what and how they should get is still up in the air, some sources suggested that the funds should basically be treated the same way streaming revenue is treated in each artist or label contract. So in the case of labels, they would get their usual cut of a stream for their pro rata share of Spotify streams.

Whether the majors decide to sell or not -- and some of this may depend on what happens with share price tomorrow and over the next few days - "the prize is much bigger than what the labels will get for selling their shares," says one industry observer. "Will there now be a healthy marketplace for music companies to tap the public equity markets?"

This story was originally posted to Billboard.

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Nicki Minaj Cancels Tour Stop Due To Technical Difficulties

Nicki Minaj is feeling “gutted” and “heartbroken” after she was forced to cancel a tour stop in show in Bratislava, Slovakia Friday (Feb. 22) due to technical difficulties, the “Barbie Dreams” rapper said on Instagram.

“I can’t believe my fans sometimes,” Minaj captioned a cascade of videos of her on stage breaking the bad news to fans. “After waiting for hours & hours, they still tried to be understanding.”

The venue didn’t have the electrical capabilities to support a major “technical aspect” of the show and lost power several times in the process, TMZ reports.

“Production was told the building does not have the power to facilitate my lifts,” Minaj explained. “They’d get the show powered up then the breaker would basically trip after a few mins.”

XL Promotion, the company promoting the show in Slovakia, shared a different story on Facebook. “The Winter Stadium of Andrew Nepelu meets all the technical standards and the agency XL Promotion respected all the conditions sent by the production of Nicki Minaj,” reads the post.

The company blamed Minaj for deciding to cancel, and added that they have done a number of “large world productions” for musical acts including Depeche Mode, Lenny Kravitz, One Republic and “many others.” XL Promotion vowed to refund all ticket holders.

Some of Minaj’s loyal Barbz waited up to seven hours before being told that the show was cancelled, according to comments on her Instagram post and tweets from fans.

Minaj said that she felt “horrible” about the whole thing. The Young Money rhymer also promised to “figure out a way,” to come back and make up for the missed performance, which was the second stop on the European leg of her Nicki WRLD Tour featuring Juice WRLD. The jaunt kicked off in Germany Thursday and rolls into Poland on Feb. 24.

Read Minaj's full Instagram post below.

 

View this post on Instagram

 

Gutted. Heart broken. I can’t believe my fans sometimes. After waiting for hours & hours, they still tried to be understanding. Production was told the building does not have the power to facilitate my lifts (which don’t only move me below & very VERY high above the stage, but also move all our props, furniture, dancers, band, etc.), our lighting rig, fog, cryo, confetti, movies/visuals. They’d get the show powered up then the breaker would basically trip after a few mins. Juice WRLD & I waited while they did this over & over for 3 hours. Some of my fans came from Austria, Nigeria, etc. I met w/a lot of them & they had the best, sweetest energy. I’m so disappointed. Slovakia, I love you so much & I’ll do everything in my power to get back to you as soon as I can. I think the venue/promo team probably didn’t expect a rap show to have such over the top production. We run the risk of someone getting hurt if we start the show & smthng malfunctions mid-show. Sorry we couldn’t have a great night together. We’ll be in Poland on Sunday @ a building that can facilitate our show. ♥️🙏🏽

A post shared by Barbie® (@nickiminaj) on Feb 22, 2019 at 4:49pm PST

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R. Kelly Turns Himself In To Chicago Police On Sexual Abuse Charges

R. Kelly turned himself in to authorities in Chicago Friday (Feb. 22), hours after being charged with 10 counts of aggravated criminal sexual abuse. Kelly, 52, was met by a flood of cameras when he arrived at the precinct. Officers quickly led him away in handcuffs.

The Grammy winner, whose birth name is Robert Kelly, is expected to remain in custody overnight before appearing in court Saturday for a bond hearing, reports the Chicago Tribute.

Earlier in the day, Cook County State Attorney’s Kim Foxx announced charges against the singer who is accused abusing four victims, three of whom are between the ages of 13 and 17, according to a grand jury indictment. Cook County Judge Dennis Porter authorized an arrest warrant for Kelly with no bail amount.

Kelly has claimed innocence for years, amid numerous allegations dating back more than a decade.

Steve Greenberg, Kelly's lawyer, maintained Friday that his client is an "innocent man," and that all of his accusers are "lying."  Greenberg tweeted earlier in the day, that Kelly would be surrendering between 11 p.m. and midnight, at the Area South location.

If convicted on all charges, Kelly faces up to 70 years in prison. See video of his surrender below.

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DESUS & MERO Bring the Brand to Showtime in Their Series Premiere

"Bodega Boys in the building!" That's how Desus Nice and The Kid Mero started the first episode of their new half hour show on Showtime. The "Bodega Boys," as Desus and Mero like to be called, took their comedic talents from Viceland and secured a slot for their talk show on the network. After airing on Thursday night, they posted the full episode on YouTube to give fans and a new live studio audience a look at what they have to offer.

The first episode of their new series did not disappoint. The two comedians represented their roots in the Bronx to the fullest by incorporating the class bodega backdrop as well as inviting none other than Bronx native, and United States Representative for New York,  Alexandria Ocasio-Cortez, as their first guest. The TV personalities greeted the politician with their now famous "yerrr" and managed to keep things light by bonding over the memes they receive from Twitter users while also managing to keep things serious as they talked about AOC's come up.

In the debut of the show, Ocasio-Cortez made the trip back to the Bronx to chat with the former Guy Code cast members, but the "Bodega Boys" also made a trip down to the nation's capital, Washington, D.C. During the trip to D.C. Desus and Mero presented the member of the Democratic Party with a flag of Puerto Rico, representing her roots, and they also were able to meet representatives Ilhan Omar and Rashan Tlaib of Minnesota and Michigan, respectively.

"Am I a gentrifier?" Ocasio-Cortez asked. "No! How are you a gentrifier? You moved from the Bronx to D.C.!" Mero responded.

Ocasio-Cortez's presence on the show wasn't the only highlight of the first episode. Desus and Mero have added a new element to their talk show, which are skits. The skit the two debuted on their talk show poked fun at the controversial Oscar-nominated film, Green Book. Before presenting the skit, Desus described the film as being, "basically just Friday with racism."

The skit features Mero playing the role of the white driver, Tony Lip, while Desus plays the role of the Black pianist. Throughout the entirety of the skit, Desus and Mero show how they feel "Green Book" was made to make white people feel as if they weren't racist in a time where racism was quite obviously prevalent.

"Wait, there's another one of these movies? What is wrong with you people? Please leave us alone. It's not our job to make white people feel better about race stuff," was a fake quote about the movie included in the skit.

Catch DESUS & MERO on Showtime every Thursday night at 11! You won't want to miss out.

 

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