Sony Music issues statement following Spotify contract leak

Sony Music has responded to a request for comment following the leak of its 2011 contract with streaming giant Spotify.

Issued to Billboard, the statement addresses Sony’s conduct with ‘breakage’ – the revenue from recording that is not contractually paid to artists but can instead be put back into the label – and states it does in fact share it with its artists.

"Sony Music historically has shared digital breakage with its artists, and voluntarily credits breakage from all digital services to artist accounts. Under the Sony Music 'Breakage Policy,' SME shares with its recording artists all unallocated income from advances, non-recoupable payments and minimum revenue guarantees that Sony Music receives under its digital distribution deals. This applies to all revenue under digital catalog distribution agreements, whether or not the guarantees, advances or 'flat' payments can be associated with individual master transactions."

The explanation follows the leak of the major label’s contract with Spotify, which was obtained byThe Verge on Tuesday. While the tech news website has since pulled its copy of the 42-page full contract from its website, its report highlights the most intriguing points,including clauses which show Spotify paid Sony Music up to $42.5 million in advances, thatSony had advertising credits worth $9 million and Sony had a Most Favored Nation (MFN) clause to receive equal trade advantages as the most favouredlabel.

Naturally, the leaked contract has piqued the interest of the International Music Managers Forum (IMMF), the organisation representing 1,200 individual entertainment manager members from over 30 countries. In a post on its website titled ‘Open letter on Record Label and Music Publisher Deals in the Digital Market’, published today, IMMF has requested for access to streaming services' substantial real-time data on listening.

“Clause #15 [of the contract] covers “Additional Reporting And Data Sharing”, and suggests labels have access toonline real-time detailed statistics and usage data," the letter reads. "We are used to seeing detailed granular reporting from many of the digital music services, and the music distribution companies who deal with digital music services. Do all record labels intend to pass on usage data to relevant artists?”

The IMMF also calls for transparency citing “clouded terms in hidden deals” as a reason to restructure business practices. “Artists should have access to all relevant information concerning all exploitations of all rights; any contract where a label or publisher waives the artist’s right to receive such information should be considered void.”

“We are not against commercially relevant Non-Disclosure Agreements (NDA’s). We (artists and their representatives) just want the basic information relating to usage (of the music and the artist’s name and likeness) to be shared with us by our commercial “partners”, the labels and publishers. The information relating to ad-revenue services, subscription services, equity stakes, technical payments, marketing payments etc, is as relevant to an artist and their representatives as the information artists expect to receive relating to vinyl records or CD’s.”

Current practices are under review in the US following American performing rights organisation BMI’s decision to sue internet radio giant Pandora over royalty payments. The US government may overhaul the consent decrees that regulate BMI and ASCAP’s collective licensing in a way that’s more favourable to music publishers.

TMN reached out to Spotify, who declined to comment.