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.”
According to one dealmaker, a major sticking point was Spotify’s $0.05 per-stream payout rate, a figure that demonstrated ‘excessive fractional penny compensation’ for top executives at Google and YouTube. “The prevailing sentiment was that Spotify should be doing a lot more to innovate lowered artist payments,” YouTube head of content marketing Claire Underwood told the Wall Street Journal. “At YouTube, our core DNA revolves around innovation and unlimited access, and that includes solving core problems related to artist compensation.”
The talks quickly turned ugly, with an irate group of Goldman Sachs bankers demanding a meeting with Google cofounders Larry Page and Sergey Brin. Despite repeated calls from Google headquarters in Mountain View, CA, both were enjoying an off-grid ‘Digital Detox’ think session with absolutely no knowledge of the deal. “They’d never really heard of Spotify,” one source relayed.
According to another source inside the deliberations, Spotify also suffered from the ‘perfect punching bag’ problem. Google’s original plan was to ‘throw a few billion’ at Spotify to shut it down, while giving lingering subscribers a free Google Play Music All Access Premium Plus 30-day trial. Sounds perfectly rational and a huge opportunity for music fans, but as that plan was being white-boarded, a scary question emerged: without Spotify getting constantly harangued in the media and brutalized by mega-starts like Taylor Swift, what would that mean for YouTube? “No one wanted to find out,” another source relayed.
But the largest sticking point was a philosophical one related to free access. “Spotify has 15 million paying subscribers,” one source inside YouTube relayed. “That’s 15 million too many.”
That comes alongside leaks that the paid YouTube Music Key was merely a ‘sandbox experiment’ designed to see what would happen if Google thought about a paid-only music platform before they forgot about it and then shut it down two years later.
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