The three major labels hold billions in streaming-service equity

Evidence

The era of streaming technology has given rise to a lucrative new revenue stream for the Big 3 labels: in order for a startup to make use of popular music in their platform or app, it must enter into deals with UMG, WMG, and SMG, which leverage their positions to attain prime pieces of early equity in companies with rapidly increasing valuation, leading to hefty paydays from IPOs and acquisitions. UMG is the exemplar for this strategy, having earned a massive 404 million payday from their equity in Beats, which was sold to Apple for 3 billion in 2014. Another prominent example is WMG acquiring a 5 percent ownership stake of Soundcloud, a startup then valued at 1.2 billion. During this pivotal time in which the new streaming-music paradigm was established, Forbes estimated the total equity stakes held by the Big 3 labels to be around 10–20 percent of the established streaming services, including Spotify, Rdio, Vevo, and Soundcloud, as well as significant pieces of other startups such as Interlude and Shazam, with total equity estimated to be nearly 3 billion. Because they do not have to do much work but allow their catalog to be used and do not have to share this profit with the artists, these deals are lucrative and power-asserting strategies for the Big 3 labels. — Andrew deWaard, Derivative Media, 213

Categorization

• XREF: UMG’s $404M Beats payoff is a concrete, traceable instrument instance — exactly the kind of verifiable data point the reader wants to trace Wall Street to cultural form.