The details of Sony’s contract with Spotify have been revealed
The Verge have uncovered the original contract documents between Sony and streaming giant Spotify. A 42-page contract signed back in 2011 (a few months before Spotify launched) between the two details how much Spotify pays Sony yearly in addition to numerous benchmarks and other clauses, including a Most Favored Nation clause that guarantees Sony will collect larger advances than any of its competitors on the platform.
In Section 13 (2), the contract defines “active user,” “gross revenue,” and “improved security provisions” that allow Sony to audit Spotify each year to see if the company has struck up a better deal with one of its competitors.
If that’s the case, Spotify will owe Sony money based on the terms of the better deal. Consider this; Warner Music Group is getting paid $1 million for each percent market share it accounts for on the platform and Sony is only getting paid $600,000 for each percent. Sony’s contract demands that Spotify pay the difference back to the label at the end of the year.
This clause essentially places Sony in front of its competition from the earliest contract negotiations to final royalty payouts — indefinitely.
The details are complex, especially when streaming rates are calculated, but the contract raises an interesting question. Artists frequently complain about how poorly streaming pays out, but a quick glance over these documents and it is clear to see that while many of its artists may be suffering, Sony is coming out way ahead of the game. Since 2011, Spotify has paid Sony up to $42.5 million in advances.
To whom that money is distributed to is conveniently not addressed in the contract.
This leak comes along with news of Sony stripping artists like Madeon off of SoundCloud after negotiations halted with the platform back in December. Details surrounding those discussions are scarce, but it’s safe to assume that the terms of SoundCloud’s deal were not as favorable as Spotify’s.