Breaking: Google Acquiring Spotify In $41.1 Billion Cash, Equity Deal

Google executive vice president for Music Nathan Rutherford previews the Spotify acquisition in Mountain View, CA

Google executive vice president for Music Nathan Rutherford previews the Spotify acquisition in Mountain View, CA

Google is now planning to acquire Spotify in a deal valued at roughly $41.1 billion in cash and equity.

The acquisition, first reported by the Wall Street Journal this morning, creates a clear frontrunner in the music subscription space.  It would also give Google a massive edge over competitors like Apple Music.

According to research emerging this week, Apple Music now has more unique users than any other streaming music service.  Apple’s rapid ascent may have rekindled the on-again, off-again acquisition talks.

The unexpected acquisition may also accelerate the upcoming combination of Google Music and YouTube.  Currently, Alphabet and its Google and YouTube subsidiaries are struggling to create a strong, premium music streaming service.  That just changed with the acquisition of Spotify, which is now reaching its 50 millionth paying subscriber.

‘The best of three worlds’

Formal signatures and filings will happen Monday.  On Saturday, key media outlets were given a preview of the deal.  “We’re thrilled to bring Spotify into our family of music properties,” Google Music executive vice president Nathan Rutherford told DMN.

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“Now, we can combine the best of three worlds: Google Music, YouTube Music, and Spotify.”

Customary closing details come later.  Post-acquisition, investors Goldman Sachs, Kleiner Perkins Caufield & Byers, Northzone Ventures, and billionaires Sean Parker and Li Ka-shing will receive several billion dollars each.  As part of the payout, all artists will also receive a special streaming payout of 1-penny per-stream, for a limited 24 hours period.

That ‘penny day’ rate will be reduced to the customary $0.00006543 rate after the 24 hour period lapses.

Perhaps most critically, Google is planning to initiate what is being code-named ‘royalty re-engineering’ alongside the acquisition.  In one expected outcome, Google will seek to eviscerate traditional royalty payout models, while maximizing obfuscated direct-pay advertising ‘monetizations’ to Alphabet.  “We hope this game-changing approach will truly re-orient artists towards an exposure model, while we continue to pay the labels,” Rutherford explained.

Daniel Ek: Pushed Out?

Spotify CEO Daniel Ek is now likely to be praised as one of tech’s most important entrepreneurs and visionaries.  But insiders are already speaking of Ek’s ouster, based on his perceived over-spending on artist royalties.

For now, Ek appears none the wiser.  “I’m thrilled by this acquisition and the belief that Google has placed in us,” Ek offered in a statement.  “While we’ve operated as healthy competitors to this point, I think we always considered joining together.  We want to help build the future of music consumption and a place for artists to grow.”

Board member and investor Sean Parker, one of the original creators behind Napster, expressed a sense of relief and validation.  “Napster offered a glimpse into the future of music technology,” Parker said.  “Now, eighteen years later, Google is helping us fulfill that vision in the best, most powerful way possible.”

Also gaining big are the major labels, who each own a piece of Spotify and stand to gain enormously from the acquisition.  But without a juicy IPO, Goldman Sachs is reportedly unhappy with the arrangement.  “They’re only making a fraction of what they could have off of an IPO,” the source relayed.

‘An expensive aqui-hire’

According to dealmakers on the Google side, it remains unclear exactly what happens to Spotify after the acquisition is complete.  One source pointed to “an expensive acqui-hire,” with Google seeking underlying technology and brain-power instead of the app itself.

As noted above, Google is busily transforming its massive music platform, YouTube, into a smoother experience for fans.  YouTube has more content than Spotify, but it’s a comparative mess.  But its content is less organized, far less portable, and generally more difficult to access.

The full Wall Street Journal article is here.  We’ll update as more aspects of the deal emerge.

29 Responses

  1. Antinet

    Google is the biggest copyright thief on the planet. Good luck getting paid anything from them. Sean Parker is relieved since Spotify was overpaying the artists….great, like I care about that piece of dung. LMK when one of these sheiss organizations is run by a creator, instead of an exploiter. Meet the new boss, pays less than the old boss.

    I would hazard that a LOT of artists are not going to be happy about this. Spotify was at least independent of the monsters. Being inside of it, forget it. When are artists and their lawyers finally going to create their own organization?

    Reply
    • Antinet

      ok, I guess I fell for it. Why is there no delete comment button on here?

      Reply
      • Donald Trump

        because DMN wants you to look like an idiot forever!!!! haha

        Reply
      • smartalek180

        You are hardly the only one.
        This is the very FIRST hit on a Google search for “does google own a stake in spotify?”
        And if I hadn’t noticed that the SECOND hit on the same search said “Google Did Not Buy Spotify for $41.1 Billion in Cash, Equity Deal,” and thought to check out what that piece said, I would have never noticed that the date of this one was “April 1,” and would have had no reason to doubt the accuracy of the headline.
        Sic Semper Internettis.

        Reply
  2. Pete Simmons

    DId you hear that all the musicians and songwriters are coming together to create a brand new platform to help fix the music business?!

    Reply
    • Remi Swierczek

      I did not. I wish they would!

      Music business SUICIDE continues because of clueless labels are asleep and POLITICALLY STRONG mega stars don’t care since they’re fed well by music hunger games.

      Live income and priority pay checks from YouTube and streamers on Ek’s DOPE keeps them content with psychopathic status quo.

      Reply
      • The REAL Remi Swierczek

        Remi, you are the smartest most intilligent commenter on here. I wish we could all have your smarts and unparrallelled intelligence. April Fools! Praise be to Spotify.

        Reply
        • smartalek180

          Is either of you the REAL “real Remi Swierczek”?
          Either way, I’m with the first one.
          The current system for distributing music is a complete abortion; there has got to be some way to better balance fulfilling the wants of a few billion eager consumers and millions of artists who deserve proper compensation for their hard work and talents — without paying obscene rentier fees to $%^&ing techno-gatekeepers and their parasite investors.

          TinHat time: the “r u human” test above:
          9+ =11
          Obviously a MEANINGFUL SIGN!!
          There are no coincidences!!1!
          “Truthers” r clearly on to something…

          Reply
  3. Apple Scruff

    Eh, I would have been more impressed by this story if it was Apple buying Spotify instead of Google. Oh well.

    Reply
  4. Daniel Ek

    Haha Paul, this was funny the first time you did it 5 years ago.

    Reply
  5. lost a reader

    You almost had me until I checked the comments. I knew it was too good to be true.

    You’ve also just lost a reader. 🙁

    Reply
    • Martin

      Not a very dedicated one if it takes this little, so good riddance.

      Reply
  6. Paul Resnikoff
    Paul Resnikoff

    Everyone, good morning. Just wanted to give updates as I receive them on this game-changing news.

    First, I just spoke with a Spotify media representative, Katherine Williams, who informed me that Daniel Ek will not be part of any combination involving Google and Spotify.

    Additionally, the Wall Street Journal just reported that Spotify will be running over the weekend, with all systems normal despite this major announcement.

    Lastly, Spotify employees were found celebrating at a bar in downtown Manhattan after work, with several reportedly clapping, downing shots, etc. So I think this one is pretty much out of the bag!

    More updates as I get them.

    Reply
  7. music stowaway

    If this is true then it makes me quite concerned and nervous..
    Somehow I don’t think it will be good for independent labels, artists, songwriters or producers..

    The majors who have equity in Spotify will make a new fortune but the artists and songs that made it successful won’t enjoy any of the spoils..

    The platform is bigger than the content or so it would seem..

    Reply
  8. Eric

    Uh, anyone find it interesting that none of the major news or trade sites covered this. Nice April fools day joke.

    Reply
  9. Fake News

    Never good for reputable media.

    Would never visit this site again 🙂

    Reply
  10. Helen

    Why on earth spotify would sell ! When human progress towards disasters they do nothing but justify nonsense.

    Reply
  11. Joe

    You suck. April’s Fools is the worst thing in the world. Maybe you should consider changing the headline now, that it is almost 3 weeks later?

    Reply

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