Oct 27, 2021
Spotify has sold two thirds of its minority stake in US-based DIY distribution platform DistroKid.
That’s according to SPOT’s Q3 2021 financial update, which, filed with the SEC today (October 27), reveals that, on October 1, Spotify “completed the sale of two thirds of its equity interest in DistroKid, realizing a gain of €132 million”.
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Spotify’s proceeds from this sale, says the filing, amounted to €144 million (approx $167m at current exchange rates).
Spotify made a “passive minority investment” in DistroKid back in 2018, but didn’t disclose the size of the investment at the time.
SPOT’s new filing reveals that its stake in Distrokid was worth €16 million ($18.5m) in January 2020, which then increased to €49 million ($57m) by January 2021.
By September 30, 2021, according to the filing, as first reported by Music Ally, Spotify’s stake was worth much more, at €205 million ($238m).
What caused this rapid bump in value?
Look no further: In August this year, DistroKid confirmed that it had accepted a new round of investment from Insight Partners, which valued its firm at a whopping USD $1.3 billion.
Remember: Spotify has just sold a stake in DistroKid worth $167 million, in a company that is itself now worth $1.3 billion.
And the stake Spotify has sold makes up two-thirds of the original stake SPOT acquired in DistroKid in 2018.
All of this information combined suggests the following:
- Spotify’s total stake in DistroKid was worth around $223 million when it sold two-thirds of it on October 1;
- That two-thirds chunk was worth around 13% of DistroKid;
- The total stake Spotify acquired in DistroKid back in 2018 would have been worth around 17% of the distribution firm;
- Spotify’s remaining stake in DistroKid amounts to about 4% of the company, and is currently worth (based on that $1.3bn valuation) around USD $56 million.
(The above is all based on current EUR-USD exchange rates, so please take it as approximate.)
DistroKid, founded in 2013, has more than 2 million artists on its platform using “the tools and services that [the platform] provides”.
The company estimates that it distributes more than a third of all new music globally, which ties into the revelation announced in May that DistroKid now distributes over a million tracks to digital services each month.
Back in September 2018, Spotify announced that independent artists could upload their music direct to the service, via Spotify for Artists.
When it acquired the minority stake in DistroKid, Spotify revealed that those artists would additionally be able to ‘seamlessly distribute their music to other platforms through DistroKid’.
By July 2019, Spotify signalled a U-turn on its decision to become a music distributor, with the decision to end its Upload Beta Program for independent artists.
Spotify published its financial results for Q3 2021 today (October 27), revealing that its global Premium Subscriber base grew to 172 million in the quarter (ended September 30).
Source: Music Business Worldwide
