Google is now abruptly walking away from its planned, $14.1 billion acquisition of Spotify, according to multiple sources speaking to Digital Music News early this morning. The all-but-sealed deal, first reported by DMN last week, would have been the largest music-related acquisition in history, but Google apparently soured on the deal in light of some “serious artist compensation concerns.”
One major sticking point was Spotify’s $0.005 per-stream payout rate, a figure that demonstrated ‘excessive fractional penny compensation’ for top executives at Google and YouTube. In other words, Spotify is simply paying way too much for ‘content’ that YouTube and Google are getting for free. “The prevailing sentiment was that Spotify should be doing a lot more to innovate around artist payments, specifically lower payments,” YouTube head of content marketing Claire Stamper told the Wall Street Journal.
“At YouTube, our core DNA revolves around innovation and unlimited access, and that includes solving core problems related to recurring artist compensation with ad-supported products that enliven and populate our groundbreaking products.”
Stamper was quick to note that Google and YouTube pay “very substantial figures” to artists across all platforms, and have “really great relationships” with artists worldwide.
“That includes Taylor Swift, who just loves YouTube,” Stamper noted. “We want to keep our great relationship intact.”
There was also lots of disagreement over Spotify’s ‘freemium’ business model, which attempts to shuttle free listeners towards paying, premium accounts (so far, Spotify has amassed 15 million paying subscribers). During deliberations, Google and YouTube executives expressed confusion over this ‘premium’ model, which didn’t involve massive, repeated uploads of unauthorized content, per-stream payouts that start at $0, and a flood of pre-roll, pop-under and overlay ads with a waterfall of abusive comments.
But in the end, the numbers just weren’t adding up. “YouTube has never charged anything to view a video, and we dramatically narrowed our fiscal losses to $4 billion in 2014 as a result,” Stamper continued to tell the Wall Street Journal. “We didn’t want to alter our success formula or confuse our users with any direct payment or ‘premium’ nonsense.”
That comes alongside leaks that the paid YouTube Music Key is merely a ‘premium hack’ designed to see what would happen if Google thought about a paid-only music platform, left it in a ‘perma private beta’ state, then shut it down two years later.
The talks quickly turned ugly, with an irate group of Goldman Sachs bankers demanding a meeting with Google cofounders Larry Page and Sergey Brin, with a renegade group even threatening to inflate the Google-owned nation of Seychelles into first-world industrialized status through a mid-prime credit avalanche, before plunging it back into third-world status by Thursday though an extreme margin-based default implosion play if the deal wasn’t finalized.
Brin, who has been stealth alpha-testing a Google Play Music All Access Plus account for Google Glass v2.x, apparently knew little about Spotify or the ongoing talks.
“What’s this Tidal thing?” Brin messaged to key Google executives.