Francis Keeling exits Spotify after nine months

MBW understands that Francis Keeling, Spotify’s VP, Global Head Of Licensing, is leaving the company.

Respected former UMG exec Keeling was drafted in by Spotify last summer to head up negotiations with labels.

The timing of his appointment was no coincidence: this was a period when Spotify’s long-term deals with record companies were expiring, and it was optimistically entering re-negotiations.

Those re-negotiations are currently the talk of the global music business.

Spotify, which has traditionally paid labels 55% of revenue, is now attempting to drop that figure closer to 52% or even 51%.

It needs to do so, say sources, to chase profitability – and ultimately to protect itself from extinction/acquisition with a successful flotation on the stock market.

However, some labels make a simple argument to the contrary: why should we drop our revenue share to such a degree just because Spotify has failed to create a sustainable business model in the past?

And, more pointedly, what other perks are Daniel Ek and co going to offer us to soften the blow? Marketing commitments? Playlist guarantees? More equity?

So far, a stalemate: the major labels are yet to officially re-sign their deals – despite Francis Keeling and his team’s best efforts.

MBW has been told by multiple label sources that Keeling has now resigned from Spotify, telling senior staff he felt the job – ostensibly London-based, but increasingly demanding of travel to New York and elsewhere – required too much time away from his family.

(Makes you wonder if Keeling, packed with insider Spotify knowledge, could yet end up back label-side. We hear he’s on gardening leave for the next few months.)

The ability to show a path to annual net income is now considered a crucial factor in any IPO attempt by Spotify.

According to Bloomberg, to reach profitability, Daniel Ek’s company needs to increase its paid subscriber base to 60m, while lifting its gross profit margin to 30%.

At last count, in 2015, that gross profit margin stood at 16.6% as Spotify posted $2.2bn (€1.945bn) in annual revenue – while suffering from a $1.8bn (€1.62bn) cost of revenue.

The company posted a net loss of $194m (€173.1m) in the year.

According to estimates from Equidate and Bloomberg’s Billionaires Index, at an $8bn valuation, the duo who created Spotify currently own more than $1.8bn in shares between them.

Martin Lorentzon reportedly has a $1 billion stake in the streaming service, while Daniel Ek owns a chunk worth $825 million.Music Business Worldwide

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