Sony contract with Spotify

Orb

New Member
Sep 8, 2010
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Interesting news,
the contract between Sony and contract seems to have been leaked.
Goes to show just how much the big music companies can push to get the best deal for themselves before the artist they represent.
http://www.theverge.com/2015/5/19/8621581/sony-music-spotify-contract

So those artists blaming Spotify for poor payments should consider what deals are forced through by the record companies that dilute the potential revenue meant for artists (although they argue that all associated revenue is theirs it seems) and the connected music company (strange how artists complaining about Spotify or other free subscription models forget about this side of revenue slice forced upon download/streaming services).
Enjoy the read, will be interesting how this unfolds in next few days, or even if it is picked up and pushed by mainstream press.
Cheers
Orb
 

amirm

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Apr 2, 2010
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Wish the contract was not removed. It is hard to make sense out of much of what the article says. The key thing it wants to express is the connection to the artists. Yet, this is a contract between Spotify and Sony Music. It by definition has zero data about how Sony divides up the money for its artists. Why then keep mentioning that in the article?

Stuff like MFN are not even worth mentioning. You have a handful of major labels controlling 90% of the music out there. You have no choice but to give in on such clauses. And they are there as what is called "anti-schmuck insurance." No label exec wants to wake up one morning to find out one of their peers was smarter and negotiated a better deal. So they always have such clauses as the article admits.

As to advances, the notion that the label may just pocket the thing is absurd. That is an advance on royalties. It is the minimum guaranteed payment as it is called. It is the #1 way labels have been trying to make money since the bottom fell out of music business. They like the start-up to take all the risks and them getting their money. They have done to to ton of companies and is standard practice for them. The money however, better go to artists or they will get sued left and right. To think that an artist would negotiate a contract that would somehow exclude the #1 way money is made from online services makes absolutely no sense.

Yes, any such contract given Sony's market power would read as highly favoring them. It is the nature of the beast. You cut the best deal you can and that is that.

And let's remember that streaming subscription is poor business model for labels and artists compared to outright sale of CDs and such. It is tilted in favor of consumers, not record labels or artists. Its economics are always that way whether one looks at movie or music business. A major studio like Sony getting $20M is nothing in grand scheme of things. Just looked up their global revenues and it is $4.5 *billion* dollars. What spotify gave them then, is a drop in the bucket.

Anyway, not defending Sony in any way. But the article seems to just reflect the reporters not being used to reading such contracts and dynamics of the situation.
 

Orb

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Sep 8, 2010
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One thing that stood out for me was that Sony screws up the revenue model a lot in the way they take a lot relating to ads, which is in essence what is used to pay artists.

Regarding the advance they are basing that on some in the industry and quoting in particular:
"I’ve worked at the major labels, and I’ve worked at the indies, so I’ve seen both sides of the business," says Rich Bengloff, president of the American Association of Independent Music. "A lot of the time, money that is paid outside of the direct usage doesn’t end up getting shared.
.

I assume this is legally possible because technically this advance is not linked to actual streaming payment model as applied to artists where X number streams/downloads provides Y cash.

Totally agree about streaming subscription being poor business model compared to CDs, but I was shocked to see statistics last year relating for album sales and it is seriously dire; basically enabling the money grab for singles download/iTunes/etc has meant that CDs as a solid revenue earner is dead.
In 2014 the highest selling CD I think was Frozen OST at 4million-ish copies....

Yep, just found a source online with the info.
Here’s the complete overall Top 10 album sales for 2014:
http://blogs.wsj.com/speakeasy/2015...and-vinyl-were-the-big-music-winners-in-2014/
blog WSJ said:
1. “Frozen” (4.47 million)
2. Taylor Swift, “1989? (4.39 million)
3. Sam Smith, “In the Lonely Hour” (2.07 million)
4. Ariana Grande, “My Everything” (1.51 million)
5. Katy Perry, “Prism” (1.50 million)
6. Lorde, “Pure Heroine” (1.48 million)
7. Beyonce, “Beyonce” (1.46 million)
8. Ed Sheeran, “X” (1.39 million)
9. Pharrell Williams, “GIRL” (1.39 million)
10. Luke Bryan, “Crash My Party” (1.34 million)

Here are the top album sales, without streams or track downloads factored in:

1. Taylor Swift, “1989? (3.66 million)
2. “Frozen” (3.52 million)
3. Sam Smith, “In the Lonely Hour” (1.20 million)
4. Penatonix, “That’s Christmas to Me” (1.13 million)
5. “Guardians of the Galaxy” Soundtrack (898,000)
6. Beyonce, “Beyonce” (878,000)
7. Barbara Streisand, “Partners” (856,000)
8. Lorde, “Pure Heroine” (841,000)
9. One Direction, “Four” (814,000)
10. Eric Church, “The Outsiders” (811,000)

Here are the top CD sales:

1. “Frozen” (2.26 million)
2. Taylor Swift, “1989? (2.22 million)
3. Pentatonix, “That’s Christmas to Me” (736,000)
4. Barbra Streisand, “Partners” (723,000)
5. Sam Smith, “In the Lonely Hour” (614,000)
6. “Now That’s What I Call Music Vol. 50? (585,000)
7. Garth Brooks, “Man Against Machine” (518,000)
8. Luke Bryan, “Crash My Party” (516,000)
9. Jason Aldean, “Old Boots, New Dirt” (512,000)
10. Brantley Gilbert, “Just As I Am” (490,000)

Here are the top 10 digital album sales:

1. Taylor Swift, “1989? (1.40 million)
2. “Frozen” (1.26 million)
3. Sam Smith, “In the Lonely Hour” (573,000)
4. “Guardians of the Galaxy” Soundtrack (556,000)
5. Ed Sheeran, “X” (455,000)
6. Lorde, “Pure Heroine” (437,000)
7. Coldplay, “Ghost Stories” (425,000)
8. Beyonce, “Beyonce” (422,000)
9. Pentatonix, “That’s Christmas to Me” (403,000)
10. J. Cole, “2014 Forest Hills Drive” (366,000)

And finally, here’s the biggest vinyl sellers:

1. Jack White, “Lazaretto” (86,700)
2. Arctic Monkeys, “AM” (58,700)
3. Lana Del Rey, “Born to Die” (42,100)
4. The Beatles, “Abbey Road” (38,200)
5. Bob Marley and the Wailers, “Legend” (37,800)
6. The Black Keys, “Turn Blue” (34,200)
7. The Beatles, “Sgt. Pepper’s Lonely Hearts Club Band” (33,600)
8. Lana Del Rey, “Ultraviolence” (31,800)
9. Miles Davis, “Kind of Blue” (31,700)
10. Amy Winehouse, “Back to Black” (27,800)

Pretty shocking state of affairs.
Edit:
And that 4 million-ish figure I initially quoted also included downloads, 3rd table is CD only while 2nd table is CD and digital album combined.
Cheers
Orb
 
Last edited:

amirm

Banned
Apr 2, 2010
15,813
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0
Seattle, WA
One thing that stood out for me was that Sony screws up the revenue model a lot in the way they take a lot relating to ads, which is in essence what is used to pay artists.

Regarding the advance they are basing that on some in the industry and quoting in particular:
""I’ve worked at the major labels, and I’ve worked at the indies, so I’ve seen both sides of the business," says Rich Bengloff, president of the American Association of Independent Music. "A lot of the time, money that is paid outside of the direct usage doesn’t end up getting shared."
He is either being misquoted or on purpose he is putting down major labels to advantage his support of Indies. As I said, advanced royalties and minimum guarantees could not be more common in royalty business. There is no way any artists would ever sign a contract when this major component is taken away.

To be sure, there can be other fees and all kinds of double bookkeeping and cheating goes on. So if that is what he is referencing, sure. But MGs (minimum guarantees) are very straightforward and are not subject such shenanigans.
 

Orb

New Member
Sep 8, 2010
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You could well be right Amir, but I am not sure myself because this is subtly different to usual royalty model perspective.
Also I am not sure whether this is correct but if so it strongly aligns with that earlier quote I provided regarding Rich Bengloff, in essence the following link is meant to be an article covering part of Lady Gaga contract and how it means advance payments for a large portion of her catalogue put onto a streaming service would not be eligible to her.
I think the article is wrong to blame the download services and should had put it into right context that it is the record companies-labels.
http://www.digitalmusicnews.com/per...ming-services-screwing-lady-gaga-every-artist

They author background was initially in the record industry as well (although he did not leak it himself)
That said, another major part of the problem is how the largest record companies-labels screw the ad revenue by taking a large slice of this from the streaming company, which is critical to artists in a free subscription model.

Cheers
Orb
 

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