Major Labels

Spotify’s Latest Offer To Labels: A 14% Lower Royalty Rate

Arrow_outline_green_downSpotify, YouTube and other music streamers are locked in tough re-negotiations with the major labels.  But for Spotify, the stakes are the highest. The largest music streamer, which loses millions of dollars quarterly, is planning an IPO this year.


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Spotify's latest offer to record labels marks an almost 14% reduction in payments, according to the Financial Times:  "Spotify made its latest offer before Christmas: it proposed cutting its royalty fees to about 52 per cent of sales from its current 58 per cent share — which at least one of the major record labels is warming to, according to people briefed on the negotiations."

In exchange for the lower tariff, the music labels are considering multiple concessions from Spotify, including stock, big upfront payments and increased restrictions on its free ad-supported music tier.

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  1. Once again the music content creators loose. Spotify needs music to survive, record companies need music to exploit, that’s what they do. The problem is, no one thinks or cares to share the money with the artists. Record companies will not share in upfront payments or profits derived from any stock increases. With out the music creators there is no business period. Record companies no longer invest in Artists they only want a larger piece of the action from 360 deals.

  2. Lets see…
    1> stock – labels keep all that
    2> big upfront fees – labels keep all that
    3> increased restrictions on its free – ???
    Sounds like Artists/ Creators lose again…..
    Once again streaming is an optimized business model for everybody except Creators. Is that sustainable?

  3. Spotify was a poorly conceived business model from the beginning, who failed to do a P&L before bribing the major record labels to do a deal.
    Interactive music streaming only makes sense for artists and the industry, if new releases are sold, not given away. Interactive streaming needs to be a catalogue / long tail provider, not a destroyer of a more equitable and profitable music business for creators.
    People will pay for music, if that’s the only way to get it. And yes, while there will be a rise in piracy; another reason why we need ‘safe harbor’ reform. Time to make the music business a business again and not some garage sale that benefits a few tech companies.
    No IPO, no Spotify.

  4. Frankly, I don’t think we really need to worry about piracy. At all.
    The dirty secret is that even if (and that’s a pretty big if) some pirates convert to streaming, it isn’t likely to get anywhere near offsetting the losses from those people who still bought music, but now feel they don’t have to (I have a post about that). Download sales aren’t falling off a cliff for no reason.
    Of course, that’s before we consider the fact that it is fundamentally no more difficult to run a pirate streaming site than it is to run a torrent tracker – I thought everyone learned this lesson from Grooveshark years ago. What that means, naturally, is that as people pick up on the concept (and why wouldn’t they?), paid streaming services will begin to lose customers and we’re back to square one (before we go there: ad-supported is a no-go, you simply can’t run a recorded music business based on the kind of revenue it offers).
    Seriously, it’s been seventeen years since Napster. Can we please finally take in the fact that every implemented business solution to the pirate problem has been dumber than the previous?

  5. The listening audience are taking cues from those who have never interacted with the listening audience.I’m happy not to support bandcamp, spotify, pandora or any other left leaning music service that spend the artist’s money on vapid theories.

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