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Spotify’s IPO could be a billion-dollar payday for Sony Music

Daniel Ek, founder and CEO of Spotify.
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Daniel Ek, founder and CEO of Spotify.

Spotify's coming IPO is validation for CEO Daniel Ek, who has built a giant music streaming business.

And on paper, the IPO* will make Ek and his co-founder Martin Lorentzon billionaires. Ek owns 25.7 percent of his company and Lorentzon owns 13.2 percent.

Spotify's "real" valuation is a moving target, but last fall the company's shares traded hands at around $20 billion, so let's use that number for now: It would mean Ek's stake is worth some $5 billion and Lorentzon's is worth about $2.6 billion.

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Another — slightly surprising — winner from the IPO: Sony Music. The world's second-biggest music label owns 5.7 percent of Spotify's shares. At that same $20 billion valuation, that stake would be worth $1.1 billion.

It's not a surprise that Sony owns a stake in Spotify. Sony, like all of the big music labels, got equity in the company as part of its early licensing deals. That wasn't an uncommon practice for music labels dealing with digital startups.

The surprise is that Sony's stake is so significant, and that it's larger than its peers. It's the only music label with enough equity to show up on Spotify's public filing today, which lists equity owners with a 5 percent stake or more.

That suggests that even though Sony isn't the biggest music label in the world — that title goes to Universal Music Group, which has about 29 percent of the recorded music market, while Sony has something in the low 20s — it has added to its ownership stake in Spotify in various funding rounds.

Now those bets are paying off.

The downside? Those bets are paying off in public, and Sony musicians will want a piece of the winnings.

The amount of money musicians do and don't make from digital streaming is a long-running and contentious issue, and while Sony, Universal and Warner Music Group have all said they intend to share a Spotify IPO windfall with their artists, they haven't explained how that will happen.

Figuring out how to divide up that pie will be sticky, and it will be that much harder for Sony to do now that its windfall is public.

Then again, it's better than having no windfall at all. It's almost like someone wrote a song about that.

* Technically, this isn't an IPO; it's a direct public listing.

WATCH: Spotify IPO to list on NYSE