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Read Spotify's lucrative contract and murky dealings with Sony

19 May 2015, 15:57 | Written by Laurence Day
(News)

Spotify's contract with Sony Music has leaked on The Verge.

The 42-page document, written by Sony, isn't all that recent - it was signed in the lead-up to Spotify emerging in the USA, at some point in January 2011 - but it reveals exactly "how much Spotify must pay in yearly advances to Sony, the subscriber goals that Spotify must hit, and how streaming rates are calculated."

Going by the document, Spotify paid "up to $42.5 million" in advance payments. No one really knows where this money goes, but The Verge claim an "insider" says that "labels routinely keep advances for themselves."

One of the most interesting segments doesn't relate to the less-than-pittance we all know that the artists themselves actuall receive, but to a clause that stipulates Sony can bend the rules as they see fit:

"Sony Music’s Most Favored Nation clause is the most intriguing piece of its contract with Spotify. Section 13 essentially makes every major aspect of the contract amendable if any other label has a better deal or interpretation of that aspect than Sony Music. Section 13(2) lists the provisions which can be amended in Sony Music’s contract if a better deal is obtained by another music label, including what constitutes an "active user," the definition of gross revenue, and any improved security provisions. Sony Music can call on an independent auditor once a year to determine whether Spotify has struck a more agreeable deal with any other labels."

There is a lot of very murky information in the contract about advertisting space reselling, profit margins (or Spotify's lack of), and its definition of the words "gross revenue".

Read more about the contract and what it does/could/possible mean/s over on The Verge

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