Sony, Warner, will share streaming asset proceeds with artists
Image: Sony artist Beyonce is set to perform new track Formation at the Super Bowl today
Both Sony Music and Warner Music have announced that they will share with their artists any cash windfall they receive from the stakes they hold in streaming services.
Warner Music holds a reported 3% ($200 million) stake in the $8.4 billion-valued Spotify as well as in SoundCloud, Deezer and other streaming services. Sony’s stake in Spotify is estimated to be 6% ($480 million).
The three major labels (including Universal Music) already said they would share with their artists, money from digital advances, minimum guarantees and non-recoupable payments from streaming services. This is the first time they’ve extended it to proceeds of their ownership of such services. (Independents committed to this last year regarding the stakes they may have).
Warner was the first major to make the move. Its CEO Stephen Cooper announced, “As there is an ongoing debate in the media regarding how artists should be paid for use of their music on streaming services, we wanted to take this opportunity to address the issue head-on.
“We strongly believe that aligning our interest with those of our artists is not only good for our artists, but also good for us and at helping the music industry.”
Not to be outdone, Sony Music made a similar pledge a few hours later.
It said, “As we have previously shared with our artists and their representatives, net proceeds realized by Sony Music from the monetization of equity interests that were provided to Sony Music as part of the consideration for a digital license will be shared with our artists on a basis consistent with our breakage policy.”
A breakage policy is rules within the companies on what do with the money made from streaming services outside of standard royalty revenues.
The timing is interesting: Spotify is preparing for an IPO in the next 12 months. At this point, the labels will cash in their stakes. But neither Warner nor Sony have revealed how they will split their sale proceeds with artists. Most analysts believe the artists’ share will not be all that significant.
But the move would hose down artist anger at the little money they’re getting from downloads and streaming. It makes the comment that its artists and their concerns are indeed important in major label corporate thinking.
Bloomberg reckons, “The gestures of goodwill from major record labels point to a wider shift in the music industry to make the economics of streaming a bit more friendly for performers and songwriters. Warner saw the offer as a chance to get ahead of other major record labels on a hot-button issue. Stephen Cooper gets to pitch his shop as a friendly place for musicians to sign.”
Universal Music had, as of today, not followed suit. Its artists have been unhappy with royalty rates after it earned about $400 million when Apple Inc bought Beats Electronics and the Beats Music service for a combined $3 billion in 2014
But the Music Managers Forum – which globally represents artist managers and self-managed artists – has challenged Universal Music to follow suit.
The MMF’s CEO Annabella Coldrick said: “Record companies taking an equity stake in streaming services has become increasingly prevalent and it is essential artists see the value as well. Warner and Sony are demonstrating industry leadership and aligning their interests with artists by committing to share proceeds from the sale of Spotify shares. This is a positive development for the long-term health of the industry. We call upon Universal to follow suit. See our Dissecting The Digital Dollar report for a full exploration of the issues around streaming.”
The newly released Dissecting The Digital Dollar explains how streaming services are licensed and how digital income is shared between each stakeholder in the wider music community.
Streaming is becoming a major source of revenue for major labels. As reported in TMN late last week, it made up 24% of total revenues for Sony Music’s Q3, which covered the last three months of 2015.
Last Friday, Warner Music announced that digital revenue accounted for 58% of its US recorded music revenue in the first fiscal quarter ending December 1. Cooper revealed that subscription revenue “is a major driver of our growth and streaming revenue remains on a trajectory to become our largest revenue source.” Streaming revenue offset declines in download sales.
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