Radiohead Demands Government Intervention to Open Spotify Contracts…

NDAred

 

Why doesn’t anyone know anything about how much Spotify actually pays?  The answer is that Spotify’s most important contracts with the major labels are completely closed, and sealed by non-disclosure agreements (or NDAs).  Which also means that if Spotify reveals anything about those contracts, the deals themselves can be nullified.

Which also means that it’s nearly impossible for major label bands like Radiohead to know what they should be getting paid, or IF they should be getting paid.

Which means bands are participating in unfair deals that they can’t even read.  “We need the Justice Department or other government [agencies] to get involved and force transparency of those contracts,” Radiohead manager Brian Message told a group of managers yesterday, according to attendees sharing notes with Digital Music News.  “This is already being looked at in Europe.”

Message’s comments were actually part of a broader set of meetings held Monday in New York to discuss streaming royalties, coordinated in part by Spotify.  The meeting in which Message spoke was held at The Standard, right next door to a Spotify event at the Soho House (more details on that here).

And if you think NDA-protected deals are stinky, the artist contracts themselves are downright putrid.   Basically, major-signed artists are part of Spotify and competing streaming services whether they like it or not, based on contracts that were often signed before streaming took off.  Which is all the more convenient for major labels, as specific clauses in those contracts often specify that large portions of streaming income will not be remunerated back to artists (and if you don’t believe that, read this).

 

Add to that the secrecy created by NDAs, and you have a recipe for complete non-transparency.  ‘There are NDAs that are driven by the labels that are designed to mask royalties,” a separate source stated.

35 Responses

    • Jeff Robinson

      A few years ago I had this conversation with a CEO (not THE CEO) of WEA. When I cried bullshit on the Equity deals with services like Spotify and asked if the labels then went back and re-wrote every contract with every signed artist on their roster to give them compensation for these equity deals, he eluded to that they did- which we know they don’t.

      But I started to get the impression that this kind of discussion was beyond his pay-grade. Which it certainly SHOULD NOT be.

      If a CEO can’t discuss this in illustrative terms, who can an artist count on?

      Reply
    • Jamie

      A friend and I both did the math about a year ago and estimated that the majors are getting AT LEAST 8 times as much per play than the indies. Following there are a number of conclusions one can draw from this:
      1- Indie labels, bands and fans subsidize Justin Bieber’s wages.
      2- Even if an indie fan listens to only indie labels, only 1/8 of the money that indie fan generates (be it through subscription or through advertising) actually goes to the indie labels. The rest goes to Bieber.
      3-Indie fans are more inclined to pay for a subscription than Bieber fans; again Indie fans are paying for Bieber.
      4- Indie fans are more inclined to share, and nearly all indie blogs use the spotify playlist feature; therefore again indie fans help generate further Spotify users which in turn generates more plays, subscriptions and (you’ve guessed it) more wages for Bieber.

      Spotify is currently generating (from their official figures) 40 dollars per subscriber. That figure will only rise as more and more people join up. It’s time for people who care about music to get more of that money into the hands of the bands and labels they care about too.

      Reply
  1. Anonymous

    Wait wait wait, can we demand government intervention to open up major labels’ licensing deals with digital services in general??? Because that would be truly interesting, seeing how much the majors are really getting…

    Reply
  2. JTVDigital

    Like any private agreement / contract, it is sealed by confidentiality / NDAs.
    As a matter of coincidence, only signed artists really complain about Spotify.
    Is the problem really with Spotify?
    When these people signed a record deal, were they forced? Probably not, and they’re supposed to read it before signing.
    It’s too easy to complain afterwards…a record deal is very similar to a standard work contract, the recording artist becomes an employee of the record company for a defined period of time / a defined number of recordings.
    You’re not getting paid? Talk to your employer and stop complaining about its business partners…

    Reply
    • Fareplay

      When Radiohead was signed there were no digital clauses because it was before the Internet.

      Reply
      • JTVDigital

        Correct, however it’s hard to believe their deal was not renewed / revised since the release of “Pablo Honey” in 1993.
        All deals include a mention about future usages also, so in worst case scenario their digital royalties % is similar to the one for physical sales.
        On top of that there have been many legal precedents over the past years allowing artists/bands to get their royalties % adjusted when it comes to digital income.
        Really, they should talk to their label instead of constantly complaining about retailers who have nothing to do with the private agreements signed between artists/bands and record labels.

        Reply
        • john cock

          Pretty sure Radiohead are not on a label since around the OK Computer/Amnesiac time period. When bands are big enough they can get their stuff released regardless of contract. In Rainbows was one of the first albums to be digitally released and I’m pretty sure it was pay-what-you-want for a while

          Reply
  3. GGG

    For major artists who think they are getting screwed out of royalties, which they most likely are, this would be a good thing.

    For the general streaming debate, it’d be much more helpful for Spotify to disclose how specific per stream rates come to be. In other words, they could take some random artist’s statement and say “they got .008 cents here because X” and “they got .002 here because X.” We basically know it’s percentages of all the money brought it and then dependent on what tier of user streamed it, but if it was broken down even more explicitly, it’d probably be easier to see how and if they could scale.

    Reply
  4. Anonymous

    “Why doesn’t anyone know anything about how much Spotify actually pays?”

    Because it’s a secret! 🙂

    And why is it a secret? Why isn’t it transparent, like iTunes?

    Because nobody makes money from Spotify — except Mr. Ek, who currently owns $400,000,000.

    Reply
    • GGG

      One could easily argue iTunes, or any tech company for that matter, isn’t totally transparent either. After all, how do we REALLY know they report all the sales….

      Reply
        • GGG

          I don’t think they are either, that comment was 90% tongue in cheek. But for the last 10%, it still COULD happen.

          Reply
  5. john

    thom yorke should put an album on spotify using tunecore and see what he thinks rather than listening to his rants about his diluted garbage which he chooses to pursue.

    Reply
  6. Adam

    I’d be curious to know under what legal statute Mr. Message thinks the government should use to compel to companies to disclose private deals they’ve made?

    Heck, while we’re at it why doesn’t he show us how much he makes from Radiohead?

    Reply
  7. invisible

    If you are going to compel daylight in the case of Spotify, then you need to do the same with YouTube. Remember, all those deals were done in secret as well. I’ve been told some very interesting things about how those deals were structured and how labels are finding ways to not pay royalties on that revenue.

    Again, if these deals were restructured it might not be enough to support a thriving music industry, but it would certainly bring light to the bullshit being perpetrated against a lot of artists.

    Reply
  8. Anonymous

    “Why doesn’t anyone know anything about how much Spotify actually pays?”

    What are you talking about? We know exactly how much Spotify pays out..
    It’s how much the labels pay which we don’t know

    The average consumer spends less than $5 per month on recorded music, If everyone paid just for Spotify and nothing else the size of the music industry would more than double! And that’s not to mention the fact that consumers who use Spotify are more likely to spend in other sectors such as touring and merch.

    Reply
    • David

      We don’t know how much, if anything, Spotify paid the major labels as an upfront sweetener.

      Reply
    • JTVDigital

      Labels pay what is written in the contracts they have with their recording artists.
      I like Radiohead’s music, but these constant moanings about Spotify are nothing but PR moves, and it is really starting to be annoying.
      You’re not happy with the terms of your record deal? Break it, and reimburse the huge advance you got paid.
      Oh what? You already spent everything? Well…

      Reply
    • Faza TCM

      The average consumer spends less than $5 per month on recorded music, If everyone paid just for Spotify and nothing else the size of the music industry would more than double!

      I think you’ve neglected to consider why the average consumer is spending half of the top-tier Spotify subscription rate now.

      Reply
  9. danwriter

    Was at the Spotify roadshow in Nashville last night. Got quite heated but the one point everyone seemed to acknowledge is that once the 70% goes to the labels, it enters a Twilight Zone of accounting that — again, most agreed — that Spotify isn’t responsible for, and that existed long before music went digital.

    Reply
    • Faza (TCM)

      Sadly, that’s the least of our worries, because with any streaming service there simply isn’t enough money coming in.

      Let’s take the most valuable Spotify customer possible, clocking in at $119.88 a year. 70% of that is $83.92.

      Now take an artist who releases one album a year. As an iTunes download, it’s worth $6.99 to the rights holders.

      Let’s next assume that the artist owns all the rights in the songs and the recording. In such a situation, every fan the artist has (defining “fan” as someone who buys the artist’s album) is worth $6.99.

      Comparing this figure with the amount generated by a top-tier Spotify subscriber, we can see that a Spotify subscriber can at most be a fan of twelve artists – the equivalent of buying one album per month. Any more and the subscriber becomes less valuable a fan than the download buyer.

      On the other hand, it’s perfectly concievable that the kind of people who become top-tier Spotify subscribers have actually got much higher reserve prices for music than $120 (which, again, is a mere $10 a month). Many of these people would likely spend much more on music in the absence of the cheaper option(s) (this includes piracy).

      Which also neatly explains why recorded music revenue is at its lowest point ever.

      Reply
    • Junjihyun

      No, Radiohead is independent of the major labels. And why would people complain that Radiohead is fighting for the rights of other musicians? How does this hurt me?

      Reply
        • X

          I believe XL Recordings only handles distribution and manufacturing of the physical versions of their albums ( cd + vinyl ). They go thru an aggregator for digital.

          Reply
          • JTVDigital

            Ok. In that case they are receiving reports directly and know exactly how much they make with Spotify streams. Everything above being PR bs then.

  10. iManage

    First off – Paul, your headline in the email is misleading when it says “Radiohead Demands Government Intervention”. The Music Managers Forum is a trade group representing music managers worldwide and as a group they are demanding transparency on these NDA deals. Manager Brian Message from ATC who does indeed manage Radiohead and Nick Cave, and was the president of the MMF UK up until recently, is helping lead the way for managers worldwide on these issues of how digital royalties are making their way to the artist.

    Second – This NDA discussion is not about Spotify alone. Spotify has been pretty clear and open on how they pay. http://www.spotifyartists.com/spotify-explained/ . The real issue is that if an artist has a rights deal (record label and/or publishers) than their royalties flow through those deals before they hit their account (depending on the deal, the recoupment, etc). If artists want a direct flow, then put our your music through tunecore and that will be your most transparent flow through right now.

    Third – the issue regarding NDAs is a very real issue for all artists. Deals are getting made between major corporations and platforms that is effectively suppressing royalty payments by structuring deals where the major company is effectively (and potentially) taking advances under different terms and receiving lower royalties (which they pay out to artists’ accounts). Artists are not privvy to these deals (let alone discussions), and are left out in the cold in fair representation. So, sure, “too bad, you signed that deal” is one way of replying above. The other is to be proactive.

    Reply
    • Jamie

      You make some great points but I think the key issue here is not what the majors choose to pay their artists from streaming royalties, it is how much are indie labels, bands and fans SUBSIDIZING major labels.

      “If artists want a direct flow, then put our your music through tunecore and that will be your most transparent flow through right now.”
      Sure artists can do that but they It may be transparent but it will still be a fraction per play of what the majors are generating.

      Reply
  11. Willis

    Yes, Radiohead, bringing in government should really help move things along. Brilliant.

    Reply
  12. Jamie

    A friend and I both did the math about a year ago and estimated that the majors are getting AT LEAST 8 times as much per play than the indies. Following there are a number of conclusions one can draw from this:
    1- Indie labels, bands and fans subsidize Justin Bieber’s wages.
    2- Even if an indie fan listens to only indie labels, only 1/8 of the money that indie fan generates (be it through subscription or through advertising) actually goes to the indie labels. The rest goes to Bieber.
    3-Indie fans are more inclined to pay for a subscription than Bieber fans; again Indie fans are paying for Bieber.
    4- Indie fans are more inclined to share, and nearly all indie blogs use the spotify playlist feature; therefore again indie fans help generate further Spotify users which in turn generates more plays, subscriptions and (you’ve guessed it) more wages for Bieber.

    Spotify is currently generating (from their official figures) 40 dollars per subscriber. That figure will only rise as more and more people join up. It’s time for people who care about music to get more of that money into the hands of the bands and labels they care about too.

    Reply

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