Apart from precise dollar figures, there’s little in Sony Music’s original licensing contract with Spotify, uncovered by The Verge, that would surprise anyone familiar with how the major media companies do business with service providers (the full contract, which ran from 2011 to 2013, is here). Most of the money due to the label is payable upfront, in the form of a recoupable advances ($42.5 million over the three year term of the deal in this case), it includes a per-play minimum fee irrespective of Spotify’s own income, and it contains most-favored-nation (MFN) language assuring Sony that none of its competitors gets a better deal — all standard stuff.
Nonetheless, the contract provides a pretty good roadmap to where the money from streaming actually goes (hint: it’s not to artists).
The advances payable by Spotify to Sony under the contract were recoupable (using a complex formula based on a fixed percentage of Spotify’s gross revenue, Sony artists’ aggreate share of total streams during the payment period and the minimum per-stream royalty) but non-refundable. If the actual payments due to Sony, as calculated under the formula, were less than the advance Sony kept 100 percent of the advance anyway. Read More »