F*&K It: Here’s the Entire Spotify/Sony Music Contract…

Earlier this week, attorneys at Sony Music Entertainment forced The Verge to remove a leaked contract with Spotify, citing questionable copyright claims.  As the details of this contract are extremely important to this industry, its artists and songwriters, not to mention a fair and sustainable streaming music future, we present it in its entirety here.

By re-posting the contract here, we aim to continue critical and ongoing discussions happening among DMN readers, as well as through our own reporting and analysis.  Maybe that’s why we received more than two dozen copies of the contract from our readers after the Verge rip-down.

33 Responses

  1. Name2

    DMN gets it right, finally.

    (It should go without saying, but readers should grab and download this ASAP if they missed the earlier opportunity).

    • Literati X

      My Faebook autobiography is a simple minded sum up ! I’m an independent eternal artist. I’m a disabled drug addict with memberships in good standing with every major terrorist organization on Earth . The wars I fight are both eXternal and internal: I’m frozen in platinum , gold and diamond inside a 250 billion dollar trust estate surrounded by Jews and crackers !

      • J.Gagnon

        disruptions are entirely negative to heathy growth on our planet,fly back in your flying saucer to that evil planet your from

  2. Anonymous

    We appreciate you Paul and it is an important conversation – perhaps the MOST important conversation of the last 5 years. That said, the actual contract is less important than the general framework of it. It’s outdated (it expired, was renewed and even the renewal is up now). The dollars have grown substantially as has the territory being licensed. What is tremendously important is that you help get as many people as possible to understand that the largest of the major labels have maintained a strategy of devaluing music in exchange for huge upfront payments, revenue guarantees and equity positions to make their corporate quarterly earnings statements as strong as possible. That approach has stunted the growth of the streaming business model and left independent labels (especially those distributed by the majors) and artists struggling to live on the crumbs.

    • DavidB

      As various people, including David Lowery, have pointed out, the ‘upfront payments’, described as an advance, are in fact quite modest – less than 10% of the expected annual royalties.

    • Frank B

      the core of the basic problem is the breakdown of this traditional relationship…. “Artist’s earnings are based on copyright, whereas label and publisher earnings are based on servicing artists.” When labels and publishers can earn revenue from NOT servicing artists, then “Houston, we have a problem” At its core anything that allows a label or publisher to earn money from exploitation of a copyright that is not shared with the creator, should be ILLEGAL.

      • J.Gagnon

        I totally agree Frank , we are being scammed by these corporation thieves like caught in an infestation trap with vampire parasites ….. workers in all sectors must join together and bring about a complete reversal of their fake profiting and family cheating slavery farce

  3. Anonymous

    “a fair and sustainable streaming music future”

    And there we have it again, that nice word.

    It’s so… unspotifyable.

  4. Anonymous

    To the artists:

    Don’t you just love the fact that YOU can shut down Spotify tonight?

    • Ed Jennings

      Artists have the power, record labels and Spotify be damned.

      Paul you have guts posting the contract.

  5. Troglite

    Here’s a question for the lawyers. Could this type of document be used by an invdividual artist to help establish that a label is not compensating them fairly? If so, could that be used to create a class action lawsuit? I also wonder if such a lawsuit could be used to force the labels to transfer ownership of their own recording masters to each of these artists within a negotiated settlement.

    I’m rather certain my thoughts ate niave, but the concept seemed interesting enough to share.

    • Satan

      It’s a contract that artists presumably read and understood before signing.

      Possibly, you could try to have a court nullify the contract because of unequal bargaining power. Bill Graham just told me that’s what he did once and it worked for him. However, these contracts have been around for years and have been litigated over for just as long.

      Good luck

    • Satan

      Just wanted to clarify that the only way that an artist’s can claim that they are being compensated unfairly is by referring to their original contract where they signed over their rights to the label. That contract will have enough loopholes in it for the label to pay the artist whatever it wants for as long as it wants.

        • Satan

          If that is the factual situation then you might be able to convince a judge to void the contract and sue for damages

          Possibly, some artist at Sony can claim that their contract says they should get a piece of that deal between Spotify and Sony

          and possibly a snowball fight will break out down here at the same time

        • Sarah

          Fraud is a hard one to win.

          Plus, if you’re looking to rescind a contract, you need to be prepared to return everything you’ve received from the other party. For example, you might get your copyright back – but you might have to repay the $100,000 your label has spent on you.

          You could certainly plead these in the alternative, but I don’t think they’re your best options.

    • Sarah

      First, there’s really no such thing as “compensated fairly” in the law. Part of the thing about freedom is that you’re free to make bad deals and bad decisions. Courts rarely (and properly, should never) interfere with a contract simply because one party made a raw deal.

      The more important question is “are you being compensated correctly according to the terms of your specific agreement?”

      The answer is “possibly.” It depends on your contract with your label, and their specific actions.

      Your basic argument would probably be that, according to the terms of your contract, your label didn’t properly pay you everything that they should have and/or that they deliberately structured deals so as to avoid paying royalties properly due to you and as originally intended at the time the contract was entered.

      This Sony agreement could be used as background in your complaint, but in order for you to use it as actual evidence to support a claim, you’d need to have been signed with Sony during the relevant contract term. If you have a reasonable basis for believing your claims will be supported by fact, you don’t need the evidence before you file a complaint. That’s what discovery is for: you’ll be able to get your label to produce relevant documentation (such as your label’s agreement with Spotify).

      Satan is right: this all depends on your precise contract with your label. While the contract is going to be strongly in their favor, most contracts are written by normal people who make mistakes and miss things – which means they’re often vulnerable to some method of attack. In fact, if the contract actually allows the “label to pay the artist whatever it wants,” that itself provides a basis for challenging it.

      It’s possible yours is absolutely iron-clad, but chances are reasonably good that it isn’t. If you want to show me your contract I’d be happy to take a look and give you specific answers, otherwise everything I say is necessarily general and subject to many caveats.

      In conclusion, yes, there’s a decent legal argument here for artists with appropriate facts. It’s far from a certain win, but it is winnable.

      Class action:

      Because the issues are so fact-specific, it’s probably unsuitable for a class action. Besides, class actions suck for almost everyone – only the lawyers win.

      A settlement to get labels to transfer ownership of masters to artists:

      It is incredibly unlikely that you’d get that, certainly in a settlement. You’re asking for their primary assets. Plus, they did provide value as well as invest substantially in many cases – asking for this (esp. in a class action) would arguably be overreaching in most cases.

      A more attainable settlement would be one that is (1) legitimately compensatory and (2) fixes the problem moving forward – and honestly, for those of you already in bad deals, if you get nothing else but the opportunity to fix your existing contracts to address these issues, you should probably jump at it. 🙂

  6. Faza (TCM)

    Whilst I appreciate you posting the contract for scrutiny and analysis, Paul, I’m afraid it is mostly a red herring.

    Pretty much ever since the issue of streaming payouts became a thing, people have been looking for major label shennanigans to explain the phenomenon. All of it is pretty much bullshit (except, perhaps, the question of why the major labels agreed to license Spotify – which I believe to be a nuanced issue that even a close reading of the contract will not illuminate).

    The real answer is much simpler: there’s simply no money in streaming.

    Spotify might make a big deal out of paying out a cool billion dollars (source: Spotify Explained in 2014 – and we might think that a billion dollars is a lot of money.

    Think again.

    Spotify has in excess of 20 million songs on its service (source: Wired – they’ve probably upped their game since 2012, but I can’t find them boasting about the size of their catalogue anywhere on the main site). If that billion-dollar payout were divided evenly amongst all of them, how much would a song earn?

    Fifty bucks, per year.

    That, my friends is a joke. Of course, some songs will earn more than others. So what happens if one song earns double that? (Being: the princely sum of $100 per year)

    Some other song must earn a whole $0.

    Thus, if half the songs on Spotify are earning $100 per year each (10 million * $100 = $1 billion), the other half is earning exactly nothing.

    For a quarter of the songs to earn $200 per year (woot!), 75% must earn zero – and so forth. In order for a song to begin to break even on its recording costs (which I’m pegging at a very conservative $1,600 – that of course does not include making any money for the artists involved), it must be one of a select 3% of all songs available, whilst everyone else makes nothing.

    There’s simply no way for the economics of Spotify – and similar streaming services in general – to not suck. It’s a feature of the system, no matter who is involved.

    That’s why things like the Sony contract simply don’t matter very much – the label simply cannot unjustly take money that you don’t have.

    • Antinet

      The labels were idiots ever agreeing to a subscription model. It should have been a micro charge – five cents a song, more for something new, maybe more to ‘own’ the song forever in streaming, and people fill their kitty through whatever charging system.

      Labels were run by desperate MBAs, trying to cash in before the entire industry imploded, which of course they helped to bring about. The whole thing is moronic in the extreme, except for the cyber jockeys, who knew they were lying out the gate about doing anything other than making themselves rich while the doddering idiots at the RIAA destroyed their own industry.

      • superduper

        Here’s my qualm with micropayments: I think at a certain point they can become too expensive.
        Let me put it to you this way: If you pay 5 cents to listen to a song, but you listen to it 20 or more songs, wouldn’t you have the right to own it for the value that it would normally be worth? In other words, if you listen to a song 20 times, you will have paid a total of 1 dollar for said song. After that, it will actually become more expensive to listen to it that way than you would if you buy it. That’s why I like to think if it not as unlimited streaming, but limited, so you can:
        1) Contain the value of the material, thereby strengthening it
        2) Give an incentive to buy/own the material
        3) while still giving the listeners a chance to sample it

        • Sarah

          Doesn’t a blend of PAYG and “buying” solve that? PAYG (say 5 cents per song, to stick to your example) for streaming, then if you upgrade within a certain period of time, you get a credit for the amount you’ve already paid. For example, let’s say it’s 5 cents to stream a song once and a dollar to buy it (for unlimited streaming or download). If you pay 5 cents to stream once and then upgrade to buy, your upgrade price is only 95 cents (because you’ve already paid for the stream). It’s not more expensive in that scenario.

          On the other hand, renting or making limited purchases is ordinarily more expensive than owning or buying in volume. You pay a premium to do business in smaller transactions, to avoid high up-front outlays of cash, etc… Why should it be different for music? Consider that someone who downloads a song or even buys a cd doesn’t own the music itself – they own the specific file or physical product, with limited rights of personal, non-commercial use. From that perspective, we’re just bundling streams differently: one stream, unlimited streams, or even a specific number of streams (eg, 10 or 15 streams); it’s natural that bigger bundles come at lower per-unit(stream) prices, and smaller bundles come with higher per-unit prices.

          Plus, I’d argue that $1 per song is underpriced for some songs (such as favorites that you listen to hundreds of times) and overpriced for many, many more (the songs you buy and then listen to once, or even never). This blended method with a PAYG focus makes it more likely that the artist’s income will match the value received by his audience from his music. If you create songs people love and play frequently, you’ll earn more money – even if you have a relatively small audience.

          • superduper

            First of all, if you buy a song, you own it. I have heard this argument of not ‘owning’ something if you buy it too many times and I think this is inherently false.
            Also, I almost agree with your idea on a credit in that you own the song after you listen to it for (x) amout of times, but here’s the thing about micropayments.
            1) If you don’t like the song you have wasted your money. That’s why I like ad-supported limited streaming instead of a user-payment system.
            2) You are bound to end up with a digital download at the end. I like to buy my music two ways: one, if I like the album, I buy it on CD. Otherwise, I buy the digital download. In other words, it is more limiting.
            3) Also, listeners would probably be less likely to use this system becaue of point (1), that is why pay to sample it if it sucks?
            So, I agree with you to a certain extent on the point of credits and I think in some cases it COULD work, but I think there are better ways to do it.

            Another thing I would say is that an average of $1 is a decent amount of money for a song. And I am using $1 as an average. Songs on iTunes ranges anywhere from 70¢-$1-$1.30 which is a very solid range in my opinion.

  7. Christenson, via FightCopyrightTrolls twitter

    Go, Barbara Streisand Effect! And digitalmusicnews, you go too!

    P.S. Love the short turing test! 🙂

  8. DavidB

    According to Billboard, Sony has made the following statement:

    “Sony Music responded to a request by Billboard with a statement on the company’s policy on breakage, the term given to revenue from the recording business that is not designated for artists and is able to be “grabbed” by labels. “Sony Music historically has shared digital breakage with its artists, and voluntarily credits breakage from all digital services to artist accounts. Under the Sony Music ‘Breakage Policy,’ SME shares with its recording artists all unallocated income from advances, non-recoupable payments and minimum revenue guarantees that Sony Music receives under its digital distribution deals. This applies to all revenue under digital catalog distribution agreements, whether or not the guarantees, advances or ‘flat’ payments can be associated with individual master transactions.” ”

    Which seems to invalidate most of the complaints against Sony, unless you think Sony would tell a flat-out lie to Billboard. The only puzzle is why it has taken Sony so long to say it.

    • Myles

      Over on another thread MusicianWhoUnderstands claims that Sony is under no obligation to share the breakage.

      So is the “breakage policy” written into artists contracts or is Sony just sharing out of the goodness of their hearts?

    • Anonymous

      The secrecy on all of these issues is puzzling. Why put such effort into being so secretive if there’s honestly nothing to hide? I don’t necessarily think Sony is lying – but I wonder why they’d handle it this way if they’re being honest.

  9. Shlomo

    The labels make nice with the Pirates and the biggest one is Daniel Ek. Seriously do a google search on him. It’s not just Spotlfy who have these back door, screw an artist in the ass deals. The radio promotion departments, marketing even the rental car agecies like music express all have kick back deals with the labels. Spend a million with us and you’ll get back 10 percent back. That money never goes back to the artists. The entertainment industry is run by the LGBT community. They don’t care about artists or your 5 year old watching 2 women licking each other on TV or 2 men rubbing each other’s back.

    Then your child grows up thinking it’s acceptable to do the same.

    Artists can’t beat the gay mafia

  10. Anonymous

    Someone please delete the comment from Shlomo. This guy is offensive and has no clue what is going on.