Spotify is no longer earning any money from Russia, as it de-monetizes ads and subscriptions in market (update)

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A number of giant media businesses have reacted to Russia’s invasion of Ukraine in the past few days by closing their services in the country.

Netflix shuttered its platform in Russia last week. Apple, meanwhile, has stopped all product sales in the market and suspended advertising on its app store there, too.

Such moves have inspired a fair bit of conversation about the music rights business’s biggest provider of income – Spotify – and whether it should block access to its service in Russia.

So far, Spotify isn’t doing that: it’s maintaining a near-full service in the territory (aside from deleting content from Kremlin-backed media).

However, here’s some big news: SPOT has confirmed in the past 24 hours that it is halting all monetization – whether from subscriptions or ads – in the territory.

What this means in practice: Spotify won’t be taking a penny more money from Russian subscribers or advertisers for the foreseeable future – or, indeed, passing that money on to its music business partners.

This was, presumably, a decision taken with the support of Spotify’s biggest stakeholders (and the biggest recipients of the money it collects): Universal Music Group, Sony Music Group, Warner Music Group, and Merlin.

UPDATE: The above is all correct: Spotify isn’t taking any money out of Russia, and so obviously isn’t passing that (non-existent) money on to music rightsholders. However, there is an important clarification to add: A Spotify spokesperson tells MBW: “Spotify continues to pay rightsholders for streams of music in Russia.” In other words, Spotify appears to be subsidizing the royalty money that would have come from subscribers in Russia, and paying it out to labels and publishers. This would mean Spotify entirely bearing the cost of de-monetizing its service in Russia, and not saddling its music biz partners with the associated financial deficit.

Spotify’s Chief Financial Officer Paul Vogel confirmed the news at the 2022 Morgan Stanley Technology, Media and Telecom Conference on Wednesday (March 9).

Vogel told interviewer Ben Swinburne of Morgan Stanley: “[Spotify has] cut all monetization off in Russia, so there’s no advertising and no premium revenue in Russia coming up.”

Vogel’s update follows Spotify’s announcement last week that it would be shutting its offices in Russia “indefinitely”, but that it planned to keep its service “operational in Russia to allow for the global flow of information”.

“[Spotify has] cut all monetization off in Russia, so there’s no advertising and no premium revenue in Russia coming up.”

Paul Vogel, Spotify

More major music companies have now followed suit with office closures and other business-throttling measures in Russia.

On Tuesday (March 8) Universal Music Group confirmed it was suspending its business operations in the market.

Today (March 10), both Warner Music Group and Sony Music Group revealed, within in an hour of each other, that their respective operations have also been suspended in Russia.

In a statement issued today (March 10), Sony Music Group, said: “Sony Music Group calls for peace in Ukraine and an end to the violence. We have suspended operations in Russia and will continue our support of global humanitarian relief efforts to aid victims in need.”

In a separate statement issued today, a Warner Music Group spokesperson said: “Warner Music Group is suspending operations in Russia, including investments in and development of projects, promotional and marketing activities, and manufacturing of all physical products.

“We will continue to fulfill our agreed upon obligations to our people, artists, and songwriters as best we can as the situation unfolds.

“We remain committed to supporting the humanitarian relief efforts in the region.”

All three majors have also made donations to organizations focusing on the people of Ukraine.

As for Spotify, Paul Vogel reiterated yesterday that the service will continue to operate in Russia, citing the flow of information, but stressed that Spotify won’t be “charging […] premium users”.

Vogel explained that Spotify expects to lose around 1.5 million Premium subscribers in Q1 as a result of its action in the market.

Explained Vogel: “With Russia’s invasion of Ukraine, we have decided to pull all of our employees [out] of Russia, and we are no longer charging for premium users within Russia.

“So the premium users we do have in Russia will churn off. The majority of them in Q1 [and] a little bit in Q2. We do expect probably a churn of about 1.5 million users out of the subs business [as a result].”

Spotify’s guidance for its service globally in Q1 2022 included 418 million MAUs, 183 million Premium subscribers and total Revenue of €2.60 billion.

Spotify launched in Russia in July 2020 and the country houses an addressable population for the platform of around 144 million.

Variety reports that the country represents less than 1% of Spotify’s total revenue.

Elsewhere in the music business, Live Nation announced that it will not be doing business in/with Russia, Netflix shuttered its platform in Russia last week, for example, while Apple has stopped all product sales in the market and suspended advertising on its app store there, too.

This week also saw UK collection society PRS for Music, which represents the rights of over 160,000 songwriters/composers and music publishers around the world formally suspend its rights representation agreement with its Russia-based counterpart, the Russian Authors’ Society RAO.

Yesterday (March 9), Sony indicated that sales of its Playstation consoles will be paused in Russia, while gaming giant Nintendo announced the same.

Over the past two weeks, over 300 multi-national companies have boycotted the Russian market in protest of its military action in Ukraine.

Some of those firms include Mastercard, Visa, Apple, Ikea and Samsung, Coca Cola and McDonalds.

At the end of Q4 2021 (ended December 31), Spotify‘s global Premium Subscriber base was 180 million, up by 8 million subscribers (5%) on the 172 million that the company counted at the end of the prior quarter (Q3 2021).

The company’s total global Monthly Active Users, (MAUs), meanwhile, grew 18% year-on-year to 406 million in Q4 2021 and by 7% compared to the previous quarter (Q3) when the platform counted 381 million MAUs.Music Business Worldwide

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