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Sony outlines plans for sharing Spotify share-sale loot with artists and indies

By | Published on Friday 15 June 2018

Sony Music

Sony Music has started to explain to artists with music in its catalogues and indie labels that it distributes how it intends to share the booty secured from selling half of its Spotify equity.

A memo on the topic talks somewhat vaguely about “eligible artists and participants” without really explaining how eligibility is defined, and the paragraph on the major’s ‘allocation methodology’ is quite something. But the official comms and a commitment to start making payments by August will nevertheless be welcomed by managers and indies who have often felt left in the dark about these things. And the Spotify loot payments won’t be subject to recoupment, which is welcome news.

All three majors and indie-label repping Merlin secured equity in Spotify as part of their initial licensing deals. Most decided to offload at least some of that equity pretty much as soon as the streaming music firm listed on the New York Stock Exchange back in April. Sony Corp subsequently confirmed it had sold about half of its 5.7% stake.

Artists and their managers questioned for years whether they’d get to share in the profits when the labels sold their Spotify shares. By the time Spotify finally listed, most labels had committed to share that money in some way, which then posed the question: what about those indie labels distributed by the majors and the artists signed to those indies.

For its part, Sony has committed to share its Spotify booty with both artists and distributed labels. Though the devil is always in the detail, and this week’s memo aimed to provide some of that detail. Which it did. Sort of.

“Since 3 Apr, Sony Music Entertainment has sold a portion of the Spotify equity we owned”, states the memo, which Billboard has published in full, having acquired a copy of the missive sent out by Sony’s Canadian division. Sony will now share what it calls ‘Spotify Net Proceeds’ – what it got from the share sale minus legal and admin costs associated with said sale – “with eligible artists and participants as soon as possible, targeting to make payments before the end of August”.

As for how the money will be shared, it goes on: “Sharing will be equally based upon each eligible artist’s or participant’s percentage of SME’s overall revenue and each eligible artist’s and participant’s SME Spotify revenue during the period when the equity was held by SME”.

Expanding on its ‘allocation methodology’, Sony says: “SME obtained Spotify equity by, in part, balancing the strength of over one hundred years of SME’s history and success, both the past and the present. Therefore we are going to use an allocation methodology which equally weighs both SME’s overall revenue and SME’s Spotify revenue during the period SME held the equity (‘The Calculation Period’) to share Spotify Net Proceeds with eligible artists and participants”. Yeah, that.

“We believe this allocation methodology gives proper recognition to those artists currently on roster and in our catalogue that were the foundation of SME when the Spotify equity was obtained”, the major adds. The methodology, it then confirms, will result “in an allocation to nearly 100,000 eligible artists and participants across almost two million unique titles”.

Confirming that each artist’s share of the loot won’t be simply set off against unrecouped advances or label costs – meaning unrecouped artists will actually see some cash in their bank accounts – the memo says: “Given the unprecedented value realised from this equity, payments will be made without recovery of outstanding advances and recording costs, or other recoupable sums – ie, without regard to recoupment – and regardless of whether specifically required by contract”.

Sony then says that it hopes this particular policy, which will be popular with artists and managers, is seen “as a gesture of goodwill to our music creators”. Isn’t that nice? Who doesn’t love a bit of goodwill to music creators? Presumably there’s a legal reason for including that statement in the memo. A goodwill legal reason, though, I’m sure.

The memo concludes: “The benefit of the Spotify investment presented SME with a unique opportunity to pay additional compensation to all of our eligible artists and participants. As we liquidate this holding in a disciplined manner over time, we will continue to make payments to all of our eligible artists and participants in the same way”.



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