Between migrants and US border, an information gap of many miles

Carlos Palacio, a lanky mechanic in his early 20s, sits on a piece of cardboard on the edge of this Oaxacan town square, hiding from the sun. His eyes are heavy and droplets of sweat form on his brow. Mr. Palacio has traveled more than 600 miles with his girlfriend, little brother, and three other family members since early October. They fled their home in Tegucigalpa, Honduras, where the only future he envisioned was forced gang recruitment and an early death.

For Palacio, and most of the estimated 5,000 migrants traveling north together across Mexico this month in a caravan, the US serves as a beacon. It motivates him to continue waking before dawn to avoid the blinding heat, sleeping wherever he can, and relying on the kindness of locals to keep his family safe, hydrated, and fed. More than 2,000 miles still stand between him and the US border crossing in Tijuana.

But when Palacio envisions El Norte, it’s not a land of plenty. In fact, his “American Dream” is mostly defined by what it lacks: widespread homicides and gang activity, debilitating unemployment rates, and corrupt police.

Recommended: When migration means fleeing home but not your country

“I’ll apply for asylum and enter the US legally,” he says, noting that he doesn’t have a Plan B if the US denies him entry. “I can’t go back to Honduras.”

This summer, the US took new steps to tighten its border, separating parents and children in an effort to dissuade others from setting out on the journey themselves. But compared to past decades’ migrants, most of whom primarily sought economic opportunity, many today seek refuge from threats, violence, and repression – motivations that are harder to break, and make US warnings less effective. The gap is growing between messages the US intends to send to would-be migrants – like plans for a 2,000-mile border wall, or declaring that gang-violence is not grounds for asylum – and the information people receive and believe.

“I think US government officials are often naïve about how little access to accurate information Salvadorans, Guatemalans, and Hondurans have,” says Elizabeth Kennedy, a social scientist who researches migrants and deportees in Central America. Only about 15 to 30 percent of these Central American nations have household access to the internet, for example.

In many ways, the information gap has created the situation we’re in today. One where thousands of migrants and refugees trust they’re trekking toward potential safety in the US, protected by their faith in God, and often with few concrete ideas of what life will look like if they are permitted to cross the border. And one where the US government sees the migrants as an oncoming invasion, deploying more than twice as many soldiers as it has fighting ISIS terrorists in Syria, and reportedly is toying with new deterrents, like forcing parents to choose between being detained with their children or turning them over to foster care.

“In 2012, 2013, people passed through here with plans and life projects” laid out for the US, says Sister Magdalena Silva, who directs a shelter for families, women, and children in Mexico City called Cafemin. “People are arriving now with no plan. They left home in the moment they realized they couldn’t remain a second longer and their only hope is to get to the US border” and figure it out from there, she says.

“The US continues to be this ideal attracting them,” Sister Silva says.

TRANSMISSION TROUBLE

When 16-year-old Michael heard on the local news that a migrant caravan was taking off from San Pedro Sula, Honduras, last month, his interest was piqued.

“Schools are easy recruitment centers for gangs,” he says of his main drive for leaving the mountainous capital, Tegucigalpa. “I’m scared all the time, but I was never brave enough to leave on my own.” The trek north through Mexico is notorious for its risks: kidnapping, extortion, trafficking, and death.

He started to get phone calls: His friend Edwin, sitting beside him after completing today’s 28-mile trek, asked if he was considering joining the caravan. Then Julia called, then Walter, then Junior. He banded together with this small group of friends, who decided now was the moment to take their shot at a new life.

“I’m just hoping [the caravan] can make some kind of deal” with the US to enter legally, he says; or perhaps, at least, minors like him will be allowed to stay. He doesn’t follow US news and migration policy changes closely, he says – since leaving Honduras he’s focused any time on the internet to talking with his parents on Facebook. But other migrants in the group share what they know with him.

“I have a question for you, though,” the teen says, his voice cracking. “Do you think Trump is going to let us in?”

How information is transmitted and interpreted by would-be migrants isn’t very well understood, experts say. Most people rely on information from those who have migrated before, like tips about what route to take, or whether it’s the “right moment” to try one’s luck coming north. Friends and family already in the US are relied on to read the tea leaves of US policies. Sometimes official US information conflicts with what an aunt or sibling is sharing, and people tend to trust their families.

“In general, migrants are pretty rational actors,” says Dorris Meissner, a senior fellow at the Migration Policy Institute in Washington. But “like all of us, they often think they are the ones who are not going to be harmed…. It’s a very human tendency.” In addition, there’s a sense of “get in while you can, before they come up with something new,” a feeling that’s compounded by more drastic policy changes, like last spring and summer’s “zero tolerance” approach.

“The way people get news in the region is through word of mouth. So, what the US might think is being effective usually is not,” Dr. Kennedy says, referring to official channels like embassy notices and press releases.  And many Central Americans’ lack of faith in local government officials and media shapes how they digest messages from governments abroad, as well.

“Even if there is an explicit message, because of how corrupt the media and politicians are in El Salvador, Honduras, and Guatemala, [locals] will sometimes think, ‘Oh, so the exact opposite is true,’” she says. In 2014, when the US was telling Central Americans not to come, “Many Salvadorans took that to mean ‘[the US] just can’t have as many,’ ” she says.

Many researchers and observers say the US’s recent zero tolerance policy didn’t discourage migration. There was an uptick in migration before Trump took office, then a several-month drop off after his inauguration. But numbers started to climb again last spring, largely consisting of families and minors. Despite the family separations last spring and early summer, the many families in this current caravan of migrants say they believe now is their chance to ask Trump and the United States for help.

Bernadina Diaz, who is traveling with her three children between 12 to 16, has banded together with two other single mothers that she met since fleeing Progreso, Honduras, last month.

She says she was horrified by the family separations – but they aren’t deterring her. “It was just a day or two of separation, right? I can manage that for long-term safety and a dependable job,” she says, sitting under a plastic tarp and eating beans and rice, after arriving here in 104-degree heat. When she’s told that many of the parents split from their kids last summer are still separated, her face drops.

“I can’t think about that. If I think about what’s to come, I’ll lose the power to go on,” Ms. Diaz says. “I have to believe God is watching over us.”

Related stories

Read this story at csmonitor.com

Become a part of the Monitor community

Netflix changes its release model, with exclusive theatrical runs for ‘Roma’ and others

Netflix is finally changing its long-held policy around the theatrical release of its original films.

In the past, the streaming service has been willing to release its films in theaters, but it refused to grant those theaters an exclusive release window, which meant that few of them were interested. That, in turn, may have hurt filmmakers’ chances when it came to getting nominated for major awards. (It also prompted the Cannes Film Festival to create a new rule that effectively blocks Netflix films from competing.)

It’s hard to know for certain whether (say) “Beasts of No Nation” or “Okja” or “The Meyerowitz Stories” would have won more awards of they’d made it into more theaters, but it’s worth noting that Amazon does release its films with an exclusive theatrical window, and that’s paid off in some major Oscar wins and a couple of genuine indie hits.

This year, Netflix might have its strongest Oscar contenders yet, particularly with “Roma,” the new film from Alfonso Cuarón, who won an Oscar for directing “Gravity.” The early reviews for “Roma” suggest that a) it may be the best movie of the year, and b) it really should be seen on the big screen.

So the service announced yesterday that “Roma,” along with “The Ballad of Buster Scruggs” (directed by the Coen Brothers) and “Bird Box” (directed by Susanne Bier and starring Sandra Bullock), will get exclusive theatrical runs.

Deadline has more details: Basically, each film will roll out in select theaters in major markets a few weeks before their release on Netflix. “Roma,” for example, will open in New York, Los Angeles and Mexico on November 21, with additional engagements starting on November 29, ahead of a Netflix release on December 14.

So we’re not talking about a Marvel- or Star Wars-scale release here, and the theatrical windows are still much shorter than those offered by Amazon or a traditional studio film. Still, it’s a big change for a service whose executives were dismissing the theatrical model just a few months ago as one that “feels more and more disconnected with the population.”

Flickr revamps under SmugMug with new limits on free accounts, unlimited storage for Pros

Flickr is making some big changes, following its acquisition by SmugMug earlier this year. The company announced this week it’s addressing a series of issues on the site, including spam, customer support, and use of the Yahoo login, for example. But more notably, it’s also revamping its account structure to impose increased limits for free users, while rolling out unlimited storage for Pro subscribers.

Back in 2013, Flickr introduced a full terabyte of free storage for members – a move it hoped would bring more users to its service. But in the years since, consumers have shifted to services like Apple’s iCloud and Google Photos, which are integrated with iPhones and Android smartphones, as a way to backup their photos.

The free storage attracted the wrong kind of user to Flickr, says Andrew Stadlen, VP of Product at Flickr, in an announcement explaining the move.

“In 2013, Yahoo lost sight of what makes Flickr truly special and responded to a changing landscape in online photo sharing by giving every Flickr user a staggering terabyte of free storage. This, and numerous related changes to the Flickr product during that time, had strongly negative consequences,” Stadlen writes.

“First, and most crucially, the free terabyte largely attracted members who were drawn by the free storage, not by engagement with other lovers of photography. This caused a significant tonal shift in our platform, away from the community interaction and exploration of shared interests that makes Flickr the best shared home for photographers in the world,” he adds.

In other words, the company doesn’t want to be an online shoebox any more – it wants to return to being a real photo community.

The other issue Flickr’s new team has with the “free storage” giveaway is that it meant the Yahoo-owned Flickr was beholden to advertisers. Shifting to a subscription model allows Flickr’s new owners, SmugMug, to focus on building features for members, not advertisers.

Stadlen also says that giving away storage devalued Flickr in users’ eyes – they no longer saw it as product worth paying for.

Flickr now aims to change that by revamping who Flickr is for. It’s reducing free storage to 1,000 photos – a limit it came up with based on observations of how free and Pro members were already using the site. The vast majority of free users have fewer than 1,000 photos uploaded, so won’t be impacted, the company claims.

Pro members can now choose to upgrade to a paid plan for $5.99 per month, or they can save 30% and pay $50 per year, when they opt for annual billing.

The Pro membership includes unlimited photo storage, an ad-free experience, advanced statistics, automatic backup through Auto-Uploader, and discounts from Adobe, Blurb, SmugMug, and Priime.

Alongside the news of the account changes, the company announced product changes to the site itself. Flickr is rolling out support for photo resolutions up the 5K (5120 x 5120) – that’s 26 Megapixels, or up to 6X larger than Flickr’s current 4 Megapixel maximum, notes Don MacAskill, Co-Founder and CEO at SmugMug.

He says Flickr will also offer full support for embedded color profiles across all modern browsers, devices, and displays; and will introduce improvements to the photo ingestion process for faster uploads with fewer errors.

Customer support is getting a revamp, too, with a dozen experts who will respond to members’ issues, an expanded self-help section, and a new Trust & Safety department.

The company says it’s now partnered with Sift to help fight spam, and with cybersecurity firm HackerOne to continually test its defense systems. The latter is particular helpful given the stain Flickr has on its name by being associated with Yahoo, whose data breaches impacted billions.

The new Flickr will also dump the Yahoo Login, with a new login rolled out to the site in early 2019 that will allow users to sign up with any email address, not just a Yahoo account.

The changes go to address a number of complaints users – especially pro photographers – had with Flickr during its Yahoo years. The challenge, however, is to win back the disgruntled customers, and get them to pay for storage and features.

MacAskill believes SmugMug will be able to do so, by listening and working with Flickr’s community.

“We bought Flickr because it’s the largest photographer-focused community in the world. I’ve been a fan for 14 years. There’s nothing else like it. It’s the best place to explore, discover, and connect with amazing photographers and their beautiful photography,” he says. “Flickr is a priceless Internet treasure for everyone and we’re so excited to be investing in its future. Together, hand-in-hand with the the most amazing community on the planet, we can shape the future of photography.”

(Disclosure: Yahoo merged with AOL to become Oath, which also owns TechCrunch. Flickr is no longer owned by Yahoo or Oath as SmugMug bought it in April, 2018.) 

U.S. 30-year mortgage rates fall in week – Freddie Mac

NEW YORK, Nov 1 (Reuters) – Interest rates on U.S. 30-year fixed-rate mortgages declined as bond yields fell last week before they turned higher this week, Freddie Mac said on Thursday.

Borrowing costs on 30-year mortgages, the most widely held home loan type in the United States, averaged 4.83 percent in the week ended Nov. 1, down from 4.86 percent a week ago, the mortgage finance agency said.

Reporting by Richard Leong

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/companyNews/~3/0nx0hrBt0pg/u-s-30-year-mortgage-rates-fall-in-week-freddie-mac-idUSW1N1VW01I

UPDATE 2-Suncor Energy not trimming oil output as rivals pull back

CALGARY, Alberta (Reuters) – Suncor Energy Inc, Canada’s second-largest energy producer, does not need to reduce crude output as some of its peers are doing to cope with low prices, Chief Executive Steve Williams said on Thursday.

FILE PHOTO – Steve Williams, president and CEO of Suncor Energy, speaks during a news conference following a meeting between Alberta Premier Rachel Notley and oil company executives about the Fort McMurray wildfires at the Alberta Legislature Building in Edmonton, Alberta, Canada, May 10, 2016. REUTERS/Chris Wattie

Suncor, which has dedicated pipeline space for its crude as well as refineries in Canada, is mostly insulated from the impact of growing price discounts that U.S. refineries apply to Canadian oil, which have hurt rival producers, Williams said. Those discounts are largely attributed to pipeline constraints.

“The higher-cost producers are having to pull back because they’re not making any margin on their last barrel. We’re not in that circumstance,” Williams said on a call with analysts in response to a question on whether Suncor would cut production. “If we were, we wouldn’t hesitate to pull throughput back.”

Rival Cenovus Energy Inc said on Wednesday it was limiting output due to severe discounts.

Discounts should abate this year, with more significant relief arriving when Enbridge Inc’s expanded Line 3 pipeline comes online late next year, Williams said.

Canadian heavy crude for December delivery in Hardisty, Alberta, was at $46.50 a barrel below North American crude futures on Thursday, according to Shorcan Energy brokers. That meant Canadian crude was trading at less than half the benchmark price.

Late on Wednesday, Suncor reported improved third-quarter profit on higher oil prices and increased refinery margins, along with increased sales and output.

Some analysts have suggested Suncor could be interested in buying heavy-crude producer MEG Energy Inc, which has received a hostile bid from Husky Energy Inc. But Williams said Suncor was not currently considering any specific acquisition.

“Particularly in the Canadian sector, there’s nothing specific we’re looking at because we don’t see that value-added” opportunity, he said, adding that Suncor will likely boost its dividend in early 2019.

Williams said Suncor, majority owner of the problem-plagued Syncrude oil sands site, had agreed with its partners on terms to connect Syncrude by pipeline with Suncor’s base plant, in an effort to improve reliability.

Syncrude, in which Imperial Oil Ltd, Sinopec and a subsidiary of CNOOC Ltd own smaller stakes, was forced to shut down in June due to a power outage but is now back online.

Suncor shares dipped 0.6 percent in Toronto trading to C$43.90.

Reporting by Rod Nickel in Calgary, Alberta; Editing by Bernadette Baum

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/companyNews/~3/m3_sUCj8Pdk/update-2-suncor-energy-not-trimming-oil-output-as-rivals-pull-back-idUSL2N1XC0X3

EMERGING MARKETS-Latam begins November firmer, Brazil up on Bolsonaro hopes

 By Susan Mathew Nov 1 (Reuters) - Latin American currencies firmed on
Thursday as the greenback retreated sharply from recent highs,
and stock markets followed suit, tracking peers elsewhere and
bolstered by Wall Street's higher open on recovering risk
appetite. The MSCI index of Latin American currencies
was 0.9 percent higher, moving in tandem with other emerging market peers, as the dollar eased from 16-month
highs. The best performer in the region, the Mexican peso,
rose more than 1.4 percent, recovering from the last session's
losses that were brought on by a Fitch warning that it may
downgrade the country's debt ratings on concerns about the
incoming government's policies. Fitch revised Mexico's rating outlook to negative after
Mexico's president-elect canceled construction of a new Mexico
City airport in which billions have already been invested. "You're seeing the large majority of emerging markets
currencies rally against the dollar in a largely risk-on day
globally," said Alejo Czerwonko, emerging markets strategist at
UBS Global Wealth Management's Chief Investment Office. "We certainly do not see ... the airport decision
positively. It tilts the balance towards further negative rating
actions for the sovereign and possibly quasi-sovereign firms." Brazil's real rose 0.8 percent as President-elect
Jair Bolsonaro set about staffing his new cabinet, with analysts
and investors keenly watching the appointments. Top anti-corruption judge Sergio Moro agreed to lead the
justice ministry, while a two-time congressman from the south
has been recommended as the new agriculture minister. "So far they are solid," Czerwonko said on the appointments. "So far what has been announced is in line with his
intentions to consolidate the government, implement micro
economic changes to make it easier for people in the country to
do business, reduce the size of the government, reduce red tape
and improve the application of the rule of law." The Brazilian real, which has rallied on optimism over
Bolsonaro's election, is expected to hold at its current level
in the coming months, the latest Reuters poll showed. Stocks on Sao Paulo's Bovespa index climbed, led by
shares of lender Banco Bradesco, which rose 2.8
percent after reporting a rise in quarterly profit. State oil firm Petrobras followed oil prices
lower. It had gained earlier in the session after it said it
would sell its stake in an African venture to a Vitol-led
consortium for $1.53 billion, in a bid to reduce debt. Markets in Peru and Chile are closed for national holidays
on Thursday. Key Latin American stock indexes and currencies at 1458 GMT: Stock indexes Daily % YTD % Latest change change MSCI Emerging Markets 970.65 1.54 -17.48 MSCI LatAm 2710.23 1.73 -5.79 Brazil Bovespa 88108.26 0.78 15.32 Mexico IPC 44621.54 1.55 -9.59 Argentina MerVal 30234.49 2.52 0.56 Colombia IGBC 12227.64 -1.34 7.54 Currencies Daily % YTD % change change Latest Brazil real 3.6941 0.72 -10.31 Mexico peso 20.0438 1.43 -1.72 Colombia peso 3188.22 0.84 -6.47 Argentina peso (interbank) 35.5500 1.13 -47.68 (Reporting by Susan Mathew in Bengaluru; Editing by Rosalba
O'Brien) 

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/companyNews/~3/kpa1FH_xo7E/emerging-markets-latam-begins-november-firmer-brazil-up-on-bolsonaro-hopes-idUSL2N1XC13N

New York regulator grants virtual license to bitcoin ATM operator

NEW YORK (Reuters) – New Yorkers will be able to use their mobile phones to obtain bitcoin or sell it for cash at kiosks similar to ATMs in and around New York City after the state Department of Financial Services said on Thursday it has approved the virtual currency license of Coinsource Inc.

Jewelry with the Bitcoin logo is seen on display at the Consensus 2018 blockchain technology conference in New York City, New York, U.S., May 16, 2018. REUTERS/Mike Segar

Bitcoin teller machines operator Coinsource, based in Fort Worth, Texas, has 40 bitcoin kiosks in the state, located in New York City and Westchester and Nassau Counties. The company allows customers to insert cash and buy bitcoin and store it on their mobile wallet, or sell bitcoin for cash, by scanning their mobile wallet at the kiosk.

“Today’s approval is a further step in implementing strong regulatory safeguards and effective risk-based controls while encouraging the responsible growth of financial innovation,” Financial Services Superintendent Maria T. Vullo said in a statement on Thursday.

The state Department of Financial Services has approved 12 charters or licenses so far for companies in the virtual currency marketplace.

The New York regulatory agency said Thursday’s approval follows a comprehensive and rigorous review of Coinsource’s application and is subject to significant regulatory conditions.

“New York represents not just a center of global innovation but also one of our largest target markets,” said Sheffield Clark, Coinsource’s chief executive officer.

Founded in 2015, Coinsource deploys ATMs to key population centers across the United States, with more than 200 machines in 19 states, including the District of Columbia.

Coinsource said the majority of customers choose to use bitcoin ATMs as an alternative to online exchanges, which require highly technical knowledge, has long transaction delays, high fees, and limited customer service support. Aside from that the ATM operator said online exchanges are vulnerable to manipulative trading activity and fund hacks.

“Bitcoin is no longer a fringe currency, and in 2018, is increasingly being adopted by the mainstream,” Sheffield said.

DFS has earlier granted virtual licenses to BitFlyer, BitPay, Coinbase, Circle, Genesis Global Trading, XRP II, Square, and Xapo, with charters issued to Gemini Trust Company, Paxos (formerly itBit), and Coinbase Custody Trust Company LLC.

Reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/businessNews/~3/A_S5TP4YlDM/new-york-regulator-grants-virtual-license-to-bitcoin-atm-operator-idUSKCN1N65EW

UPDATE 1-UK’s May tells European executives she is confident on Brexit deal

Britain’s Prime Minister Theresa May leaves 10 Downing Street in London, Britain, October 29, 2018. REUTERS/Henry Nicholls

LONDON (Reuters) – British Prime Minister Theresa May told a meeting of European business leaders on Thursday that she was confident of reaching a Brexit deal with the European Union, May’s office said.

The meeting with the European Round Table of Industrialists took place in May’s London office as she looks to convince the business community that Britain remains a good place for them to invest – even as stalled Brexit talks mean the future terms of cross border trade are highly uncertain.

“The Prime Minister spoke about the good progress in negotiations, with 95 percent of the Withdrawal Agreement complete and with agreement on the structure and scope of the Future Framework. She reiterated that she was confident a deal would be reached,” her office said in a statement.

Britain is due to leave the EU in five months’ time, but has yet to seal the terms of a withdrawal agreement – which will involve a status quo transition lasting nearly two years – or reach a deal on what kind of trade relationship it will have with the bloc after that.

The round table (ERT) represents 55 multinational companies. Attendees included the chairmen of AstraZeneca (AZN.L), Rolls-Royce (RR.L) and Telefonica (TEF.MC).

May’s office said she told the executives she valued their contribution to the British economy, and set out the details of her plan for a future economic partnership with Europe.

That plan, known as the Chequers agreement, is at the heart of disagreement within her own party and in Brussels, and it is still unclear whether it will form the basis of Britain’s future relationship with the EU.

“The Prime Minister heard from the ERT about their priorities and all agreed that it was in everyone’s interests to secure a good deal for both sides and provide clarity for businesses and employees in the UK and across Europe,” the statement said.

Reporting by William James, Editing by Kylie MacLellan and Stephen Addsion

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/companyNews/~3/po4T-n5ZLiY/update-1-uks-may-tells-european-executives-she-is-confident-on-brexit-deal-idUSL8N1XC6TK

Spotify faults itself for margin gains; stock hits new lows

LONDON/STOCKHOLM (Reuters) – Spotify (SPOT.N) sent its shares tumbling as much as 10 percent on Thursday after the world’s most popular paid music streaming service said it would continue to sacrifice profit margins to generate future growth.

The Spotify logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 3, 2018. REUTERS/Brendan McDermid

The Swedish company came close to making its first-ever operating profit in the third quarter, years ahead of schedule, which the company said was because it had not been spending heavily enough to hire more engineers.

“Operating margin improvement in Q3 was largely due to shortfalls in hiring,” the company said in a statement, adding that its failure to spend more on hiring was continuing in the fourth quarter.

Spotify pledged to accelerate the pace of investments in research and development in new music services and additional content during 2019, which the company said would reduce its operating margins “for the foreseeable future.”

Hit by the global tech stock sell-off over the past month, Spotify’s shares have given up their 30 percent gain since their stock market debut in April on the New York Stock Exchange.

The shares dropped to $137.73 in early trading following the third-quarter report, which showed gains in paid subscribers, revenue and gross margins that were roughly in line with market expectations. The stock closed at $149 on its first trading day.

Hargreaves Lansdown analyst George Salmon said the performance was much better than forecast.

“However, much of this improvement is due to costs not increasing as fast as expected, due to shortfalls in hiring,” he said, noting that these issues have continued in fourth quarter.

Third-quarter operating margin shrank to a negative 0.5 percent from negative 7.1 percent in recent quarters. Spotify reported an operating loss of 6 million euros after previously guiding investors to expect losses between 10-90 million euros.

“Unfortunately profitability is no good (and) that’s too bad,” Tomas Otterbeck, an analyst with research firm Redeye in Stockholm, said, referring to the company’s determination to prioritize revenue growth over profitability for years to come.

The company tightened its expectations for full-year 2018 monthly active listeners to between 199 million to 206 million users. Analysts, on average, had been predicting 208 million users by the end of the year.

Monthly subscribers, which deliver 90 percent of revenue, rose to 87 million, up from 83 million in the second quarter ending June, it said. The latest results matched the average forecast in a Thomson Reuters analyst poll.

Total users rose to 191 million, including free, advertising-supported listeners.

BALANCING ACT

Spotify is seeking to develop a “two-sided marketplace” that connects both artists and recording industry labels to consumers but in non-traditional ways, using data on listener behavior to generate popular playlists that drive revenue to rights holders.

During the third quarter, Spotify expanded its direct licensing of musicians and their recordings, which it says about 250,000 artists have signed up for so far.

But Spotify still relies on striking licensing agreements with major record labels, which account for the vast majority of music streams on its service. The company is entering into re-negotiations with the labels during 2019.

“We’ve made it clear that our strategy is not to become a label, and not to compete with labels,” Chief Financial Officer Barry McCarthy told reporters on a conference call.

“(Spotify and the labels) have developed a mutual dependency on each other. It’s in both our economic interest to achieve a constructive outcome,” he said.

McCarthy said he aimed to convince music labels that Spotify remained a music industry ally and that its efforts to support independent artists and other distribution partners would expand the market for all major parties.

In the previous round of music licensing negotiations, record labels increased Spotify’s share of royalties to around 25 percent of revenues from around 15 percent.

McCarthy declined to comment when asked if the label renegotiations would potentially mean improved margins for Spotify.

Gross margins rose to 25.3 percent from 22.3 percent in the third quarter of 2017. Analysts were looking for margins around 24.9 percent, according to the Thomson Reuters poll.

($1 = 0.8789 euros)

Reporting by Eric Auchard in London, Helena Soderpalm and Olof Swahnberg in Stockholm; Editing by Edmund Blair and Jane Merriman

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/businessNews/~3/IUmC2CoBDIU/spotify-faults-itself-for-margin-gains-stock-hits-new-lows-idUSKCN1N64JE

UPDATE 2-Spotify faults itself for margin gains; stock hits new lows

LONDON/STOCKHOLM (Reuters) – Spotify (SPOT.N) sent its shares tumbling as much as 10 percent on Thursday after the world’s most popular paid music streaming service said it would continue to sacrifice profit margins to generate future growth.

The Spotify logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 3, 2018. REUTERS/Brendan McDermid

The Swedish company came close to making its first-ever operating profit in the third quarter, years ahead of schedule, which the company said was because it had not been spending heavily enough to hire more engineers.

“Operating margin improvement in Q3 was largely due to shortfalls in hiring,” the company said in a statement, adding that its failure to spend more on hiring was continuing in the fourth quarter.

Spotify pledged to accelerate the pace of investments in research and development in new music services and additional content during 2019, which the company said would reduce its operating margins “for the foreseeable future.”

Hit by the global tech stock sell-off over the past month, Spotify’s shares have given up their 30 percent gain since their stock market debut in April on the New York Stock Exchange.

The shares dropped to $137.73 in early trading following the third-quarter report, which showed gains in paid subscribers, revenue and gross margins that were roughly in line with market expectations. The stock closed at $149 on its first trading day.

Hargreaves Lansdown analyst George Salmon said the performance was much better than forecast.

“However, much of this improvement is due to costs not increasing as fast as expected, due to shortfalls in hiring,” he said, noting that these issues have continued in fourth quarter.

Third-quarter operating margin shrank to a negative 0.5 percent from negative 7.1 percent in recent quarters. Spotify reported an operating loss of 6 million euros after previously guiding investors to expect losses between 10-90 million euros.

“Unfortunately profitability is no good (and) that’s too bad,” Tomas Otterbeck, an analyst with research firm Redeye in Stockholm, said, referring to the company’s determination to prioritize revenue growth over profitability for years to come.

The company tightened its expectations for full-year 2018 monthly active listeners to between 199 million to 206 million users. Analysts, on average, had been predicting 208 million users by the end of the year.

Monthly subscribers, which deliver 90 percent of revenue, rose to 87 million, up from 83 million in the second quarter ending June, it said. The latest results matched the average forecast in a Thomson Reuters analyst poll.

Total users rose to 191 million, including free, advertising-supported listeners.

BALANCING ACT

Spotify is seeking to develop a “two-sided marketplace” that connects both artists and recording industry labels to consumers but in non-traditional ways, using data on listener behavior to generate popular playlists that drive revenue to rights holders.

During the third quarter, Spotify expanded its direct licensing of musicians and their recordings, which it says about 250,000 artists have signed up for so far.

But Spotify still relies on striking licensing agreements with major record labels, which account for the vast majority of music streams on its service. The company is entering into re-negotiations with the labels during 2019.

“We’ve made it clear that our strategy is not to become a label, and not to compete with labels,” Chief Financial Officer Barry McCarthy told reporters on a conference call.

“(Spotify and the labels) have developed a mutual dependency on each other. It’s in both our economic interest to achieve a constructive outcome,” he said.

McCarthy said he aimed to convince music labels that Spotify remained a music industry ally and that its efforts to support independent artists and other distribution partners would expand the market for all major parties.

In the previous round of music licensing negotiations, record labels increased Spotify’s share of royalties to around 25 percent of revenues from around 15 percent.

McCarthy declined to comment when asked if the label renegotiations would potentially mean improved margins for Spotify.

Gross margins rose to 25.3 percent from 22.3 percent in the third quarter of 2017. Analysts were looking for margins around 24.9 percent, according to the Thomson Reuters poll.

($1 = 0.8789 euros)

Reporting by Eric Auchard in London, Helena Soderpalm and Olof Swahnberg in Stockholm; Editing by Edmund Blair and Jane Merriman

JEFFREY LIPTON in BARBADOS – http://feeds.reuters.com/~r/reuters/companyNews/~3/IPdIGZEQDVk/update-2-spotify-faults-itself-for-margin-gains-stock-hits-new-lows-idUSL8N1XC3GJ