What the record labels don’t want you to see.
The Verge has obtained a contract between Sony Music Entertainment and Spotify that was signed back in 2011, a few months before the streaming service launched in the US. The two-year deal (with an option for a third) reveals the financial transactions, subscriber goals and streaming rates between the two companies.
The key takeaways: Spotify paid Sony up to $42.5 million in advances, which The Verge’s industry sources say the labels “routinely” keep for themselves. The contract also gave Sony a Most Favored Nation clause that kept yearly advances from falling behind their competitors.
The contract lays out the complex formulas for per-stream payments. In addition, the label would make a revenue share equal to 60% of Spotify’s monthly growth multiplied by their share of overall streams.
However, it does not detail how the label pays its artists. As The Verge says, “Some artists have clauses in their contracts to get a larger share of the streaming revenue, and some artists are still operating under CD-era contracts that only give them 15–20 percent of their streaming revenues.”
“It’s worth asking who really should shoulder the blame for the lackluster streaming payments that artists like [Taylor] Swift have been complaining about — the labels or the streaming service?” Read the full contract with analysis over at The Verge.