The major record labels and indie-label agency Merlin invested a sum of 8.8 million euros in Spotify (NYSE:SPOT) back in 2008 for a combined 17.3% share. Once the music streaming company went public, it was only a matter of time before the record labels took some of their money off the table.

They didn't waste much time. Spotify's direct listing allowed shareholders to sell immediately instead of abiding by the typical lockup period of traditional IPOs. Sony (NYSE:SNE) immediately sold 17% of its stake on the day Spotify went public and sold about half of its 5.7% stake during the second quarter in total. Warner Music Group initially sold 75% of its shares in May, but it had dumped its full holdings by the end of the quarter. Merlin dumped 100% of its shares in May. Vivendi, the owner of Universal Music Group, is the only label still holding all of its shares, which it values at 456 million euros.

So why are the labels all so eager to get rid of their stakes in Spotify?

Spotify CEO Daniel Ek giving a presentation.

Image source: Spotify.

What management had to say?

During Warner Music Group's first-quarter earnings call, CEO Steve Cooper explained, "We're a music company and not, by our nature, long-term holders of publicly traded equity."

Merlin CEO Charles Caldas echoed the sentiment: "It is outside of Merlin's remit to hold a long-term equity position in a publicly listed company where there is a liquid and transparent market for that equity."

Sony's management didn't give a particular reason for selling its shares (or for keeping half of them), but said it would share the gains with artists as outlined in its standard policies.

What management isn't saying is that the companies are already heavily invested in Spotify, even if they don't own any shares.

Don't invest where you make your money

Streaming music is the force driving the music industry's revenue higher after a decade and a half of declining sales. Last year, streaming royalties accounted for two-thirds of industry revenues, according to the Recording Industry Association of America. Streaming brought in about $5.7 billion in the U.S. last year for record labels, and that number is surely growing as streaming only becomes more popular.

Spotify is only a portion of streaming revenue. It's no longer the market leader in paid music subscriptions, nor is it the largest source of free music streaming (YouTube). Still, it's a relatively large part of the market that's an increasingly important source of revenue for U.S. record labels.

It's usually smart to dump shares of a company as soon as possible when it represents such a large source of income already. Most employees that get paid with stock options should get rid of shares when they've fully vested. By the nature of their relationship with the company, they're already heavily invested in the future success of the business.

So in no way should record labels dumping shares of Spotify discourage regular investors. The record labels aren't privy to any information about an imminent collapse of Spotify or its shares. They're simply diversifying their investments.

While Spotify does have its own issues, shares are arguably expensive, and its ability to eventually turn a profit is still in question, the long-term thesis is still intact. Spotify is still well positioned to win new streaming subscribers and listeners, and eventually everyone will use streaming as a primary form of music consumption. Spotify is currently the best way to invest in that trend.