It was our first ever look at at the legal arrangements between a music label and the streaming giant, going into detail about advances and revenue shares.
But Sony has issued legal threats, forcing the tech site to pull the original copy of the contract. According to editor-in-chief Nilay Patel, the studio “sent FOUR DIFFERENT cease and desists asserting copyright claims.”
The Verge’s original article remains online, however. The contract dates back from 2011, lasting for 3 years, and provides a fascinating window into the murky world of the music business.
Here are the details from the contract:
- There’s no set rate for how much money studios make from streaming. It’s easy to imagine streaming pay-outs as along the lines of 1 play = $US0.01 — but the reality is much more complex. There is a minimum fee of $US0.00225 per stream in the contract, and Sony also gets “60 per cent of Spotify’s monthly gross revenue multiplied by Sony Music’s percentage of overall streams.” Other factors and formulae make the situation more complex again. (There’s also no indication of how much of the money Sony makes actually makes its way into the artists’ pockets.)
- Spotify pays out big advances to labels. The contract, signed prior to Spotify’s US launch, promised Sony Music a $US42.5 million advance spaced out over the 3 years, regardless of actual plays. One source told the Verge that labels “routinely keep advances for themselves,” not sharing them with artists.
- Sony gets to sell its own ads. The label was gifted $US9 million in free ad space. It could use this to promote its own artists — but could also sell them on to make a profit.
- Sony doesn’t want its rivals getting a bigger slice of the pie. The contract contains a “Most Favoured Nation” clause, allowing the studio to renovate the contract if any rivals are offered better terms.