How Streaming Services are Screwing Lady Gaga (and Every Other Artist)

Streaming services like Spotify are notorious for making tiny, per-play payments.  But it turns out that none of that matters, because none of that makes it back to the artist.  And now we have proof: here’s a copy of Lady Gaga’s contract with Interscope Records, owned by Universal Music Group, the largest label in the world.

Pay careful attention to the second page, section 10.06, which states that Interscope will not pay anything to Lady Gaga on licensing deals that involve the entire label catalog.  This is exactly how licensing deals are arranged with streaming services.  According to the label source that leaked this document to Digital Music News, this covers any and all revenues coming back from streaming services, including per-play revenues and acquisitions (like the recent one involving Apple and Beats).


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85 Responses

  1. Alex

    Sorry. How is this streaming services’ fault?

    This is a label deal.

    • TuneHunter

      Labels, the music industry and musicians DO NOT NEED ALL OPEN streaming, YouTube or Pandora.

      All delivered less than $4 billion dollars to music business and ERASED double that that amount from ITunes, Amazon and terrestrial Radio.

      Conversion of Radio both internet and terrestrial to MUSIC STORES will bring $10 billions in first year.
      Better yet, Pandora YouTube and Spotify with slight to drastic BUSINESS MODEL alteration will double music related revenues in the same 12 months. All we need is to lock up the music in virtual walls and start collect cash at the DISCOVERY MOMENT.

  2. fact checkin' cuz

    +1 on the above. This is the label’s contract.

    However “Record label fucks over artist” isn’t much of an eye-grabbing headline any more, is it?

      • Alex

        Really!? This deal was done before Spotify ever launched. So how were they in cahoots?

        • Paul Resnikoff

          Alex, I won’t coddle your simplified world view. Streaming services like Spotify know exactly what’s happening here, they know about these contractual structures and issues. Yet they publicly make statements to the opposite, they pretend that artists are getting compensated, and attempt to blame labels exclusively for these problems.

          • But

            But was it really any different when Steve Jobs came in, unbundled the album format and forced a universal pricepoint down everyone’s throats?

            There was the same artist backlash back then…

          • Anonymous

            I have a label. Artists on the label receive 50% of net streaming revenue. Are you going to give credit to streaming services for that, the same way you blame them for this?

          • Someonewhoknows

            This is a poor interpretation of the wording in that agreement. Streaming services are accounted under a different provision in artists agreements. And, streaming services are not licensed on a “lump sum” basis.

        • stephen craig aristei

          Alex, the labels are equity partners in spotify…..Now do you think that happened over night, or did it take a few years to put into place?????Let’s be reasonable and logical here…..!

      • jw

        The word “cahoots” implies that Spotify had some sort of interest in the deal, other than simply launching.

        Spotify was kept out of the U.S. for 2 years before reaching these licensing agreements… if this is all true, I would imagine that they spent 2 years trying to reach a better deal for all parties involved, but at last had to concede in order to get the product to market.

        It doesn’t make any sense to discuss these arrangements without discussing the arduous 2 years of licensing agreement negotiations and all of the cancelled Spotify launches. Spotify tried to get out of the door again and again… it was the labels’ demands holding everything back. If all of this is true, we have insight into exactly what Spotify was dealing with at this time.

        Again, your headline is misleading.

  3. Sebastian

    So, it’s a shitty deal between label and artist. How are interactive streaming providers at fault?

    • Anonymous

      It is perfectly possible for labels and streaming services to screw the artists.

    • Lulu

      I’m not on a label but still managed to get shafted by Spotify. Nearly 8,000 streams in one quarter and my payout (full publishing) was about $85.00. Sound fair to you?

  4. Pete

    Surely this cannot be accurate as the music press has been eager to show how little artists receive from streaming – even some have printed statements disclosed by artists to prove how little they get.

    No artist to date has come out in the press and said they receive nothing (based on my reading of the music blogs/posts)

    Logic says she must have a bad lawyer or this is part of some other deal that compensates her

  5. Korben Dallas

    How does Spotify take blame here? Seems more like the attorneys who represent the artists need to negotiate better deals. Nobody held a gun to anyone’s head to sign this.

    • Anonymous

      Well, you know the old joke:

      LABEL: “Sign here.”
      ARTIST: “I can’t.”
      LABEL: “Sure you can.”
      ARTIST: “No, you broke my fingers.”

  6. jw

    Are you saying that a Lady Gaga play doesn’t count as a Lady Gaga play, but as an Interscope play? And that Interscope gets a payment for all Interscope plays each pay period?

    That’s a bold move, even for a record label.

    It seems like… if the up front payments to labels were bonus payments, they might have a leg to stand on. If they were advances towards streams, there should be a paper trail that leads back to artists. And if, in fact, artists’ own plays are being grouped into a label-wide bucket, there should also be a paper trail. I don’t see how either of those two scenarios would hold up in court as pursuant to a blanket license. Using that logic, it seems like Interscope could negotiate a blanket license with iTunes or Amazon or anyone, conspiring to cut the artist out of the picture.

    It’s a little bit hard to believe that that’s what’s actually happening.

    • stephen craig+aristei

      It was also hard to believe that The Col. got half and that the Beatles got screwed on so many deals, especially merch and music pub…..But they did……! Just goes to show you that just because the act is massively successful, doesn’t alway mean that they have “smart” representation, nor that they make “all the right moves”….all the time ! ! ! Many of the major management companies and so called “top” attorneys have little to no actual “hands on” experience in many of the important areas having to do with building careers and developing creative assets….In over 40 + years I know very few attorneys who truly understand music publishing and how it really works and “doesn’t work”…….They , for the most part, have “reputations” built upon “hype” !

    • RealTalk

      That is exactly how it works with major labels. They get paid based on their label share of total streams. Spotify does not nor ever has payed anyone ‘per stream’ that’s simply not how their payment structure works. They pay based on a share of total streams per month under the specific deal terms they hold with the content aggregator. Dividing total revenue by total streams is totally misleading and incorrect.

  7. NMD

    Doesn’t anyone see that IT IS NOT the streaming services the problem but The LABELS! Streaming services are huge sums of money as well as 70% of their revenue being paid in royalties…how those royalties are then distributed are the rights holders responsibility.

    • stephen craigaristei

      Yes – I will agree with you…..It is not the Streaming service’s fault if the Record label decides to get it’s artist to “sign off” on all the revenue the service will provide and pay them…..I would like to see the entire contract and see where the “trade off” was for the act…Because I would like to think that her attorney and manager were astute enough to use this item in obtaining a major concession….However, like with the Beatles and many many other acts, we have all been amazed and surprised before.

  8. Ya

    Paul, I’m not defending the labels or streamers here, but aren’t we missing the part in the contract about how much Gaga got up front for signing this deal? Possibly sections 2-9?

    I mean, if an artist wanted to exchange all future streaming royalties for a lump sum up front, or some other pay structure, there is nothing illegal about that, nor nefarious.

    That said, I totally get your point about how the bigger system works, and ultimately to the detriment of artists over the long term:

    1. Label negotiates up front deals with their artists that have zero backend on streaming for the artist. Pays them lump sum.
    2. Label licenses content to streamer for very low per-stream rates (or zero cost per stream) and a sizable chunk of equity (since label doesn’t have a variable cost going out to the artist).
    3. Streamer goes public and label keeps all the dough from the equity sale.
    4. Now that streamer is public, a new licensing deal is cut that costs streamer dearly and begins to flow the newly raised public capital back out from streamer to labels.
    = people who bought streamers stock on public market get screwed, labels get rich, streamer founders and investors get rich, artists outcome depends on the deal they did up front with label, and streaming company struggles or goes under now that their costs go through the roof after going public.

    Does that about sum it up?

    • Dark Money

      “…aren’t we missing the part in the contract about how much Gaga got up front for signing this deal?” Excellent point.

      Other pertinent questions:
      1. The flip side of the above: the advance may not have been that much, but did she have any income back then? Maybe she was desperate to sign a deal at that point.

      2. This was back in the olden days (2007). Were streaming services really on the radar then? And you can imagine the record company’s response to objections over the clause in question: “we can’t pay you proportionally because these damned licensees won’t give us accurate data!”

      But Ya, I think you nailed it re: that’s how the larger system works.

  9. There is something...

    100% label issue here. Paul hatred for streaming at its finest. Labels have been screwing artists for decades, long before any internet service. But wait, next thing you know, we’ll have a headline about how Dr Dre stole a candy from another children when he was at primary school…

  10. Faza (TCM)

    On first reading – and without the full contract on hand – I do have my doubts about the proper interpretation of section 10.6. The key phrase is “notwithstanding anything to the contrary contained herein”.

    Looking at section 10.5, one has to wonder whether streaming counts as “public performance of Phonograph Records”. One could make a case that yes, it does. In which case, it is likely that Lady Gaga would receive 50% of receipts under (i). This is corroborated by the one-time tale of Gaga receiving $167 for a million Spotify plays – that would certainly have been under the above contract, unless it was re-negotiated after Gaga broke.

    It would seem that what 10.6 is saying is that Lady Gaga – as an artist – is not entitled to a share of any advances, equity, charges etc. associated with the issuing of blanket licences – which is old news.

    On the other hand, 10.6 can also be interpreted as meaning that the artist is not entitled to any share of royalties originated under blanket licences – such as those issued to streaming services – which would be news proper. I suppose a statement from (possibly anonymous) “sources connected to the artist” would be too much to hope for? Either Lady Gaga got some royalties from streaming services – likely more than $167 – or she never did. Knowing the facts of the matter would clear up the meaning of 10.6.

    • Anonymous

      It’s very clear that section is only talking about public performance royalties. In most of the world, that doesn’t directly come from the label but a PRO.

  11. Ari Herstand

    Seems to me the lawyer who negotiated this contract on behalf of Lady Gaga royally f’d up. But then again, when she signed she had very little clout to negotiate something better. I wonder if any artists are able to strike this from the contract.

    • Clarence Darrow

      This issue wasn’t on anyone’s radar at that time. They were still grappling with whether a download was a sale or a license.

      Wrong place, wrong time. Shit happens. Sometimes there is no evil, just happenstance.

    • Paul Resnikoff

      The attorney that gave this to me said this was by no means a one-off, it is routine. You sign it, or you don’t.

  12. Ari Herstand

    And Paul, this is hardly the streaming services fault. This is 100% on the label. Artists don’t have to sign with a label. The hundreds of thousands of independent artists are getting paid from streaming services. Remember Ron Pope’s testimony? $300,000+ from Spotify as an independent artist.

    • Paul Resnikoff

      This is 100% on the label.

      Again, a really simplified view of things that somehow makes streaming the saint here. So, if Spotify pays the label and knows none of that money is going to the artist, can you then say it’s not their fault? No, you can’t, as they are then complicit 100% in the scheme.

      The sad part Ari is that, from what I understand, a big amount of those numbers for Pope are from a major label release. Which he’s probably getting nothing from.

      • Anonymous

        This might be shocking, they might not actually know how much artists are actually getting paid. I mean, contracts are deals between two parties, and Spotify isn’t a party to this contract.

      • Ari Herstand

        Well, the truth is, 100% of the money paid out from Spotify for Ron Pope goes directly to Ron (and no label). He released two tracks on Universal Republic 4 years ago and has since purchased the rights back. Universal owns nothing. The rest of Ron’s catalog (over 100 songs) have all been released originally by him alone.

        So to reiterate, the $300,000+ paid from Spotify to Ron went in Ron’s pocket. No label.

      • hippydog

        Quote “So, if Spotify pays the label and knows none of that money is going to the artist, can you then say it’s not their fault? No, you can’t, as they are then complicit 100% in the scheme.”

        but IF you blame Spotify on this one (whether they knew about this or not),
        You then have to blame everyone even slightly connected.. The lawyers, the managers, the roadies, the media, the labels, and the artist..

        The contract sucks but the artist did sign it.. All 38 insane pages of it..

        What blows my mind is if this was a standard contract..

        a.) is this still a standard provision?
        b.) how many artists signed the same deal?
        c.) How come the media is just hearing about it now? (you would think someone somewhere would have noticed this before)

      • Allan

        But Paul, contractually speaking, the service provider doesn’t have a direct deal with the artist, so how could they be liable? They pay there due diligence to the license owner. They can not be held responsible if the license owner doesn’t “pay their artists”. How could they be?

        If you go to a mechanic and get your car fixed and then sell it to me but don’t pay your mechanic, I can’t be held responsible nor should I be blamed that I’m driving a working car because I legitimately paid for it. The onus is on you to pay the bills that allowed you to do the financial transaction with me in the first place.

    • Charlie

      I think it is clear that the record label is not acting in the best interest of their artist in this case, but that certainly does not make them 100% at fault here.

      Streaming services care about the end user experience. That’s it. Sure they want to have the best and biggest catalog, so they have to pay pittance to rights holders and talk about how they love music, but their business model is based on amassing a giant user base, like any software company. Daniel Ek cares as much about music as Mark Zuckerberg, Bill Gates or the Whats App guys… it’s a vehicle to get people to download his app. Nothing more.

      Record Labels, despite their evil villain track record. actually need people to buy music to stay in business. So needless to say they care about music. But it’s about time they start sticking up for their artists while there are still a class of people who make original music for a living.

  13. David

    The highlighted provision seems to me ambiguous, as Faza suggests in his comment above. There are various principles applied by lawyers and courts in resolving ambiguities in a contract, one of which is the maxim ‘contra proferentem’ which specifies that ambiguous provisions are to be interpreted against the interest of the party who proposed or drafted the provision – in this case almost certainly the record company.

    • Anonymous

      I think the section is pretty damn clear: no royalties will be issued for blanked licenses. Spotify is a blanket licensee, therefore they don’t have to pay royalties on it. Period.

      Yes, it’s totally possible to write a legitimate contract that provides one party with no royalties. It’s called getting an advance or fee-for-service. That’s how most contracts between a creator and a distributor in the film/games/technology industry work actually.

      • Faza (TCM)

        Respectfully disagree.

        For the past six years I’ve heard all sorts of things about how much (or rather – little) people are getting from streaming services – indies and majors. Only recently, there have been lawsuits over what rate is applicable (and whether it should be 50%). As I mentioned above, there was even a story about Lady Gaga’s Spotify royalties.

        At no point in time, has anyone ever mentioned artists not being paid at all.

        Given all the flak going towards Spotify et al, I consider it far more likely that we’re reading the contract wrong (especially since we’re missing four out of six clauses regarding royalty payments) than such a big issue would fly under our collective radar for so long.

        • Anonymous

          It’s possible that artists are getting paid from streaming. But it’s not going to be because of section 10.05, which only deals with performance royalties. If artists are getting paid from streaming, it’s not going to be a substantially higher royalty rate then what they get from sales, which is no where close to 50%.

          I don’t this 0% royalty is that strange though. Some artists flat out do not get paid royalties at all. Labels are under no obligation to pay royalties. The artist might just be paid fee-for-service.

        • Anonymous

          Advances are borderline fee-for-service. You get a $100,000 advance with a 10% royalty rate, you need $1,000,000 to start even seeing royalties. And that’s ignoring extra charges, which are very real (anything the label does, they charge to your royalties ON top of your advance).

          Now you might be like, yeah but what if you are a super popular artist, then you’d exceed your advance right? Well maybe, but your advance GOES UP based on how valuable you are. So a popular artist might get a $20 million dollar advance. So even popular artists generally only get the advance.

          So really, artists have always been fee-for-service. Royalties are largely an illusion. The advance you get is your pay.

          • Faza (TCM)

            Yes… and then again no.

            Yes, because most artists never recoup and labels have come up with all sorts of creative ways to make sure that artists don’t recoup as long as possible.

            And no, because some artists do recoup. How likely that is is a combination of the artist’s potential and business savvy/negotiating power. One of the smartest bits of advice in the MMF’s rather aged Music Management Bible is to never accept contractual terms on their face, lest unfavourable royalties come back and bite you in the bum ‘coz you were gunning to get the advance as quickly as possible.

            In any case, the laughable royalties from streaming are highly unlikely to affect the artist’s recoupment position to any great extent, but even the nickels and dimes must be properly credited towards advances, which means that statements must be sent, if the contract provides for a particular revenue stream (this is me with my accountant’s hat on: forget cash-flows, it’s the documentation that’s important).

            This means that even an unrecouped artist will know whether they’re getting royalties from streaming – except that in this case, those royalties have been paid by the record company in advance.

            Which brings us back to the issue at hand: I don’t think we have any reason to believe – based on the language published here – that major label artists (and Lady Gaga specifically) are not getting credited for streaming. This opinion might change if I get to see the whole contract (or, at least, the entirety of Section 10).

  14. GGG

    Jesus, Paul. Really? I mean, we get it, you hate Spotify, but you’re pretty much on par with the National Inquirer at this point. I expect to see articles about Bigfoot being spotted at a Kings of Leon concert, or Beyonce pregnant with an alien baby soon.

    • Paul Resnikoff

      I’m showing you an actual contract, and proof that streaming services are making payments that never reach the artists, and that this is structured into artist contracts. The source is an attorney, close to these contractual negotiations, who is taking a huge risk allowing me to publish this document excerpt.

      Please consider why this source has decided to take this very risky move, one that could destroy his/her entire career if he/she was found out. This isn’t Bigfoot, this is actual, real information about your industry.

      So you can scream at me all you want, you can say I ‘hate Spotify,’ you can call me names and try to undermine my publication, but that is not going to change the facts that have been laid out here. Labels obviously understand this game because they’re making these contracts; Spotify (or any other streaming service) is not an innocent third party here, they are a very savvy, very intelligent group of individuals and investors that understand this dynamic and structure well.

      I think you might want to ask yourself why you have such a strong reaction to this information and primary documentation, and why you feel so driven to direct your vitriol towards me.

      That’s all.

      • David

        The highlighted passage makes it clear that if there are any up-front payments not attributable to particular plays (and not merely advance payments to be set against subsequent royalties for particular plays), then the Artist has no legal claim against the record company in respect of such payments. It does not say that there actually are such payments, plausible though that may be. Spotify’s ‘transparency’ statement implicitly excludes the possibility of such payments, so if there are any, Spotify is guilty of misleading the public.

        What is not clear from the highlighted passage is whether the contract excludes all streaming royalties reaching the Artist, which is what your opening paragraph claims. Did your lawyer contact say that it does?

      • GGG

        How is “How Streaming Services are Screwing…” more accurate than “How Record Labels are Screwing….?”

        How would any streaming service benefit from telling labels to withhold royalties from their artists?

        What I take issue with is that this is just another bizarre, unnecessary, incomplete, and harmfully misdirected spin, much like blaming streaming/Pandora with barely a mention of PROs. It doesn’t make sense to me to keep putting so much blame on streaming, while there are other parties in the pipeline separating streaming money and artists.

      • jw

        >>Spotify (or any other streaming service) is not an innocent third party here,
        >> they are a very savvy, very intelligent group of individuals and investors
        >> that understand this dynamic and structure well.

        The issue here is that you’re placing very speculative blame on streaming services like Spotify, rather than leading with the record label, who we know architected this contract, far beyond any speculation. It’s not the streaming services doing the screwing, the streaming services are being used by the label to screw artists.

        Does a company like Spotify know the contents of the deals made between these labels & these artists? Maybe they do, maybe they don’t… it’s speculation. Assuming they’ve been made aware of the nature of these agreements, & assuming they wanted to do something about it, what is the recourse? What cards did Spotify hold from 2009 to 2011 that they could’ve played to force the labels to renegotiate contracts that artists had already signed?

        At the time, Spotify was basically just another SpiralFrog or QTrax or iMeem. And the ink had already dried on Lady Gaga’s deal.

      • Alex

        Paul – what do steaming services gain by, allegedly, not compensating artists? I see what labels gain but not Sptify and others. Certainly it’s not good PR.

        • Paul Resnikoff

          Paul – what do steaming services gain by, allegedly, not compensating artists?

          Actually, a lot: they gain access to a catalog. Yes, they suffer a bit of backlash, but that is also a calculation. Will the public and music fan care enough? Or does the issue remain within the music industry, on sites like Digital Music News? I think Spotify has – perhaps correctly – determined that it doesn’t bleed into the mass consciousness, and they can get away with it.

          • GGG

            Funny this is the only response you choose out of this batch…because it’s an irrelevant point. Spotify IS paying out. It’s the LABELS who are withholding money.

            If you want to crusade against Spotify’s per stream payout, that’s one thing, and there’s value behind that. BUt this story is intentionally misleading, and you know it.

  15. DB

    I’m not sure if the interpretation of paragraph 10.06 is such that the Artist does not receive money from Spotify. Spotify pays a statutory royalty to SoundExchange as a result of its compulsory license for it’s non-interactive Internet radio feature. These digital public performance fees are paid out as follows: 45% paid directly to the Artist, 50% paid directly to the LABEL, and 5% paid to AFM (American Federation of Musicians) for a fund for musicians. Clearly, the Artist (Lady Gaga) receives a payment for the use of her songs on Spotify.

    Spotify also pays a statutory royalty to ASCAP, BMI, and SESAC for the public performance license required for an Internet radio site. As a songwriter, Lady Gaga also receives her share for songs that she writes. The label does not get a piece of that.

    This clause 10.06 might be addressing upfront or ongoing license fees for access to sound recordings, but not specifically to the use of sound recordings as covered by Copyright Law, where compulsory licenses result in payments directly to creators.

    • An Indie

      @DB, while Spotify does pay royalties to SoundExchange for their non-interactive radio-like feature the much, much larger payouts are to directly licensed distributors (and then to labels) for their on-demand service. Any label that is licensed into Spotify (or any of the on-demand streaming services that also offer a “radio” option as well) can see that they receive payments from the service or their distributor and also from SoundExchange. The payments are for different licenses – the direct license required by a service offering an on-demand function and the compulsory license administered by SoundExchange for the radio-like function.

    • Anonymous

      Thanks for sharing this DB! The technical jargon in the contract seems to be throwing up a false-screen here… SoundExchange pays out royalties along the following lines: 50% to the Label, 45% to the Featured Artist, 5% to non-featured artists. Whereas ASCAP/BMI pays out 50:50 to publishers & songwriters. These organizations pay-out to each party individually.

      Section 10.6 in the contract refers to solely to monies received by the label PURSUANT to the blanket licenses. In other words, Gaga has no claim to the 50% owed to Interscope under the PRO agreements with SoundExchange. This has nothing to do with the 45% Gaga receives from SoundExchange or the 50% she receives from ASCAP/BMI/SESAC.

  16. J

    anyone who is confused by this who works in any way in the music business should immediately pack up and find another line of work…

  17. Jack

    Hey Paul, I read DMN every day. Without fail. And I honestly believe you know more about streaming than anyone in the industry. So I continue to read whatever you put up. But you pessimism towards streaming has yet to make sense to me. My problem is that you compare streaming to album sales and digital downloads instead of comparing streaming to piracy. But that’s a serious flaw. There is no buying music (yes I understand albums and digital downloads make up a large part of the industry but that’s not my generation (25 and younger. NOBODY and I mean nobody in 5 years that is under the age for 25 now will be purchasing music). And as a young music industry professional, it’s apparent to me that the future, is streaming. Will it be as profitable as digital downloads? No, maybe not. But it doesn’t matter, because it’s the future.

    • Paul Resnikoff

      Jack, this post says nothing about whether streaming is ‘the future’ and doesn’t compare it to downloads or other formats. It’s about a massive, structural, and intentional flaw in the payout system that streaming services are participating in.

      Is that the future you want?

  18. Anonymous

    I think Paul’s been seeing some traffic spikes with all of the sensational Dre posts.

    This is tantalizing clickbait in the same vein, and just a bit sad overall to see the fire get stoked…

  19. JTVDigital

    Guys, seems like you are missing the point Paul is trying to make.
    The article highlighted is about blanket licenses between a streaming service (you’d see similar clauses in download services’ deal) and a Label owning a catalog of master recordings.
    It says when Label licenses its catalog to the Streaming service (whatever is in the catalog, here we’re talking about hundred thousands of tracks, this is not Gaga-focused but a generic clause), the artists taken individually would get none of this money.
    Same principle as when Apple buys Beats, artists that were on Beats don’t get a share of the deal’s money.
    This is a B2B license deal for a catalog of recordings, between a Record Label and a Retailer.
    It’s an “entry fee” for the Retailer to acquire the right to exploit the Record Label’s catalogue.
    Very common and really nothing to scream about here.

    • GGG

      No, pretty sure every commenter here gets the point and agrees it’s misleading. He’s using this to insinuate that streaming services are not paying artists. Which is true, but thats because they pay the labels. If the labels fuck their artists, how is that Spotify’s fault? The contract in question is not a contract between Spotify and Lady GaGa; it’s with INTERSCOPE RECORDS.

      • JTVDigital

        The clause highlighted is about blanket catalog licensing between Label and Spotify, nothing to do with artists royalties on streams or whatever.
        And this ends up by a debate like “Spotify screwing artists”, wtf?

        • David

          There seem to be three interpretations:

          1. You think the clause covers only ‘blanket’ payments, not artists’ royalties on streams.
          2. Paul (the author) thinks it excludes per-stream royalties as well as blanket payments. Some commenters agree.
          3. Faza and I think it is ambiguous between (1) and (2).

          Regardless of our views, what matters more is how it is actually applied in practice. If Paul’s interpretation is being applied, then under ‘industry standard’ contracts no signed artists would be getting any royalties at all from Spotify streams (or presumably other streaming services), except maybe in their capacity as singwriters. I find this difficult to believe, because:
          (a) streaming services have been going for years, yet this is the first time we have heard such an extreme claim;
          (b) it goes against much that we *have* heard, such as arguments about whether artists should be getting a 50% share, a 12% share, or whatever; and
          (c) if it is true, then signed artists would have a very strong interest against the arrangement, and we would surely have heard much more about it from them. I don’t believe that people like Thom Yorke or David Byrne would have been intimidated into silence by Non Disclosure Agreements, and they have been vocal against the implications of streaming, yet they have not raised this particular objection;
          (d) since managers usually take a proportion of artists’ income, they would also have a strong interest against these arrangements, yet people like U2’s manager don’t seem to have objected either.

          • David

            Correction and clarification:

            – ‘singwriter’ might be a good word for a singer-songwriter, but I just meant ‘songwriter’

            – interpretation (1) might be clearer as ‘You think the clause only excludes artists from receiving any part of ‘blanket’ payments, not artists’ royalties on streams’.

          • Anonymous

            I suspect it is (1), but there is no fucking way in hell that artists are getting a 50% royalty on streaming. We don’t have the whole contract, but the label would be idiotic to treat streaming revenues as as any different then regular sales for royalty purposes. So my guess is, if artists are getting anything from streaming, it’s in the 12-16% range of a normal sales royalty. So either 12-16% or 0% but certainly not 50% as Faza claimed. That 50% number he quoted is specifically for performance royalties, and actually, performance royalties are not even paid by the label in most of the world but directly comes from a PRO (which also pays the label directly).

            Before you get all excited about performance royalties, certainly that’s only a tiny fraction of what Spotify pays out. Performance royalties might sound great, they are calculated black box that nobody except the PRO management understands (they are not proportional like you’d think, most of the revenue goes to a PRO “inner circle” of voted in membership). In most of the world (incl. the USA), PROs are immune from being audited by artists too.

            Not an ideal situation for artists, but what else is new.

          • David

            Artists signed to one of the Merlin group of labels, like Adele, have been getting 50%, but Charles Caldas of Merlin now says that is too high and has to be reduced.

            There are in fact plausible reasons why labels should pay artists a higher percentage of the revenue they receive than the traditional 10-20% of the retail price of a CD/LP. After tax, manufacturing, retail and other costs, record companies are estimated to receive only about 30% of the retail price – see here: The artist:label ratio of revenue is therefore around 1:2.

            In the case of streaming the manufacturing and distribution costs to the label are essentially zero, and the streaming service takes 30% of total revenue. (I don’t know the tax position, but the streaming service presumably pays some VAT or similar tax on its own revenue, no doubt charged to the country with the lowest tax rate they can find.) To equate to the position of a CD, the label should pay the artist in the region of one third of the revenue they receive, including an appropriate share of any lump sum payments.

          • Anonymous

            Yeah but what is Adele getting for that? Indie labels don’t have the same ability to promote artists that the majors do. Adele is a special case, because stands out on her own. A major label can put out some autotuned R&B track by an zero-talent artists and make millions. That’s all to do with their connections, consequently, they deserve a bit more of the share then the guy who farts garbage into the microphone and gets turned into appealing music post-production. Dare the say, that artist probably doesn’t even deserve royalties at all. He can be a work-for-hire.

          • JTVDigital

            It is definitely 1, just read what was highlighted.
            Anything else was just another reason for bitchin’ on Spotify or other streamers.
            This is a very common / standard clause you’ll find in all catalog license deals between a Label and a Digital Retailer. No per-stream royalties involved here at all.

          • Faza TCM

            Quod Erat Demonstrandum.

            However, we cannot pass by the following statement:

            Streaming services like Spotify are notorious for making tiny, per-play payments. But it turns out that none of that matters, because none of that makes it back to the artist. And now we have proof[…]

            without comment. The comment is: since the contract excerpt offered as proof does not, in fact, support such a conclusion, there must be additional context that prompted Paul to publish this. It has been strongly hinted that this context was supplied in conversations with the party supplying the contract. We want to know what it is.

            I can say with come certainty that I am amongst the most vocal critics of Spotify and streaming in general, which is why I do not want “my side” to get bogged down in conspiracy theories, especially if they can be easily shown false (all it takes is a single statement). Plus, I am a bit disappointed that the big revelation turned out to be a bit of a damp squib.

  20. Dunedinmusic

    Elephant in the room here is: Who owns Spotify…

    • Paul Resnikoff

      According to our sources, labels own roughly 20% collectively.

  21. Anonymous

    pointless article and misleading title to get viewings.
    journalism at its lowest

  22. There is something...

    Like streaming services have anything to say about how labels write their contracts… In what fantasy world do you live ? Streaming services are NOT in a position where they can tell the labels how they should pay their artists. Plain and simple.

  23. @MusicBizGuy

    Over the past couple of years the debate surroundng streaming payouts has been extensive – almost a daily occurrence. While for those it truly impacts in a substantial way financially, this debate is truly meaningful. However if I were to hazard a guess, the money derived from streaming has no real dollar impact on 99.9% of all artists. This streaming debate serves mostly as a serious distraction to the overwhelming number of artists whose sole function should be to concentrate on the most productive ways to monetize themselves in the new music business. Streaming, at this time, is not one of those ways. Fighting over pennies will hardly put dollars in the average artist’s coffers. Those who truly can make substantial dollars from streaming seem to be addressing this issue and are fighting to resolve this matter more favorably towards artists. However, the real issue that confronts most musicians who should be making money from streaming is how to get their record company to pay them a fair piece of the funds generated by streaming services from their music and which are paid to their record companies who never distribute a fair portion to their artists in the first place.

  24. Jason Stoddard

    Yeah any time I part that this is a LABEL issue. PR says that is just a streaming service talkin point. The fact is the artists and their management are signing these contacts with the labels. Stop bashing the streaming services and place the blame where it belongs.

  25. funn networks

    Yet another we’ve been working diligently to correct. Its time all parties are happy and satisfied.
    This has been going on for nearly a decade btw and its time for a change. THE ONLY way this can happen is to increase the per play pay outs for labels, artists, publishers and song writers. We’ve almost got it nailed down.

  26. #resnikoffisanignoramus

    This is probably the most ill-informed, wantonly ignorant piece or utter crap i’ve ever read on this site (and there have been plenty, and i mean plenty of other bits of ignorant crap over the years). Any moron with even a rudimentary understanding of the business will surely see this for the deep and utter uninformed, unresearched, uneducated unverified and desperately sensational crap that he has dreamed up here.

    “the premier news and information authority for music industry and technology executives? Resinkoff a Digital expert???? Give me a break – The only thing Resnikoff is an expert in is ignorance and petty vendettas.

    If Spotify is the last desperate fart of a dying corpse, then DMN is the last desperate fart of a dying art called journalism.

    btw – and i offer this as a little clue to the moron, if you have printed clause 10.6 of a contract, and it refers to “anything contrary contained herein” you just might want to read clauses 10.1 – 10.5 – and maybe also see how “blanket licenses” are defined within the contract (and another little clue – it;s not Spotify or any other retailer). but i suppose that would require reading, and some dedication to finding facts, which would mean a little work – so no chance of that then.

  27. Anonymous

    Paul… this is pretty standard. When I signed my publishing deal it had the same clause, and partially that is for if the pub co moves to a different sub publisher in a territory and receives an advance on the catalog.

    I think you are looking for something that isn’t there.

    And the guy who said Gaga’s lawyer F’uk up… she had zero leverage when signing her deal… Now is a different story. That guy obviously either is a cutting edge oither fucker lawyer, who I want to hire, or not in the business at all.

  28. steven corn

    After reading all of the comments, I would have to say that 100% of this is merely intellectual hypotheticals. Without seeing the entirety of the agreement, it is impossible to know what’s going on here. We all can play a guessing game as to the intent, meaning and real-life application of 10.6. But you just can’t review two sections of an agreement and jump to any conclusions. Based on what I’ve read in this post, Gaga is either getting paid or not. That much is clear. 🙂

  29. Dylan Paul Mathis

    @TuneHunter I really like your concept of discovery monetization. Streaming is not the way of the future. It has proven to be a fiat driven, non-sustainable business model of tertiary industries. Looking at the PE ratios of any streaming service provider, one can see empirically, that it is constantly deep in the red. I don’t think Pandora has ever turned a profit over. The industry of technology itself is uncertain because its growth is solely dependent on innovation. Therefore, stratification is blurry amongst users, consumers, fans and artists. Name and brand identification is mashed up and lost in a virtual data driven oblivion. There is currently no balanced business model in regards to proprietary music content. However, there is a light a at the end of this dark tunnel. It is a method in which everybody can win. We have to think in terms 21st century growth, not 20th century preservation. I’m an analogue warrior, but analogue is niche oriented and upcoming generations are out of touch with hardware or hard copies. They also believe that free is a societal norm in regards to music. The music industry is obviously the first that needs attention, The hemorrhaging has to be stopped or the talent will go away and die. @TuneHunter I would like to discuss ideals and solutions with you and anybody else willing to collaborate to find a way out of the Pandora hell and to bring a balanced model back to the business music entertainment.

  30. Margriet Koedooder - Amsterdam

    I think this clause does not show at all how streaming services are screwing artists. What is called copyright on phonograms in the US is called neighbouring rights on phonograms in Europe (and in many other countries). Neighbouring rights are by law awarded to artists and to the producers of phonograph records. For example in the Netherlands, the collective rights organization Sena, by its own legal right, will collect monies for the public performance of the phonograph records. Sena will then pay 50% to the artist and 50% to the registered owner of the phonogram, which can be the artist’s own record company or label. In this example, 100% of the income in the end is going to the artist. But if the record company is for example Universal, 50% of the monies collected by Sena will go to Universal. In labeldeals, the contracting parties often agree to a 50/50 split of the neighbouring rights income, which is awarded by the neighbouring rights organization to the owner of the phonogram, for the duration of the label deal. A completely different matter is the question whether streaming services pay enough money to neighbouring rights organizations such as Sena. So far, Sena does not collect big amounts from the streaming services. This is a matter of negotiations between the streaming services and the collective rights organizations.

  31. Sameer

    This post is embarrassing clickbait journalism.