Sources: Sony Could Face Class-Action Litigation Over Spotify Advances…

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The following is a developing story.  Please check back for ongoing updates.

Sony Music Entertainment, as well as Warner Music Group and Universal Music Group, could face a very serious, class-action lawsuit involving non-payment of streaming advances, according to multiple sources briefing Digital Music News.

Specifically, the action would seek to get artists paid fairly for massive, upfront cash transfers from streaming services like Spotify, which many artists and managers say are not being shared with a large majority of signed artists.

The class-action would come in the wake of a very embarrassing leak of Sony Music Entertainment’s 2011 contract with Spotify, one that featured large cash advances and control over portions of Spotify’s advertising inventory (that contract can be found here).

The leaked contract also included ‘Most Favored Nations’ guarantees, which strongly suggests that the other two major labels are enjoying similar terms.

“This goes beyond Sony, and [the other majors] can be touched,” one source relayed.

The sources were careful to stress that the potential action has not been filed, and currently faces significant hurdles related to artist participation and the language of specific artist contracts.  Importantly, that includes specific language in many artist contracts that could offer major labels absolute impunity to claim 100% of advance payments from Spotify — regardless of the ethical issues involved.

That appears to be the case with an older contract between Lady Gaga and Universal Music Group, which contains specific language allowing UMG not to pay Gaga anything on special advances, cash-outs, or anything else that doesn’t involve the direct, specific use of Gaga’s tracks.

The Gaga contract was first leaked to Digital Music News, and is available here.

But even if that problems persists, sources noted that a group of artist representatives and attorneys may still be motivated to bring the action, merely to highlight just how badly these contracts are screwing their clients.

“That may be the only way we can get this to change,” one source relayed.

Elsewhere, both the European Commission and US Copyright Office are taking a look at the Sony/Spotify contract, thanks to urgings by organizations like the International Music Managers Forum (IMMF) and the International Artist Organisation (IAO).   At this point, it’s unclear what action these influential organizations will take, though this will certainly sway future decision-making.

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Meanwhile, both Sony Music Group and Warner Music Group have been frantically taking steps to assure artists and managers that they are indeed paying artists on streaming advances.  But the statements all revolve around ‘breakage,’ an antiquated concept that protected labels from making payments on things like cracked wax cylinders and broken vinyl that couldn’t be sold.  “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,” Sony offered in its only post-leak statement this week.

Warner Music Group has now chimed in with a similar message, despite almost laughable skepticism.  “Warner Music shares all advances, minimum guarantees and ‘flat fees’ with its artists,”Warner Music Group offered in a statement.

“This policy has been in effect at Warner Music since 2009, purposely treating breakage like other digital revenue.”

Warner Music Group, like Sony, is no stranger to massive class actions.  Just recently, WMG settled a large class-action lawsuit by more than 3,000 interns, who accused Warner Music of deliberately exploiting them and violating local labor laws by paying little or nothing for their work.  Elsewhere, Warner also agreed to pay $11.5 million to settle class accusations of underpayment on digital downloads, part of a broader group of settlements related to digital royalties to legacy artists.

More as this situation develops.

21 Responses

  1. Anonymous

    Again, I think most of us know how the labels work.

    But let’s not forget that Daniel Ek — the self-proclaimed saviour of the music industry — wanted the money, took the deal and tried to hide it from the artists.

    Nobody can trust him, or Spotify, after this.

    • God, You're Dumb....

      …you don’t even realize that the advances are money that Spotify – “Daniel Ek” – PAID TO the labels. No that he took.

      Nobody can trust SONY Music after this (not that they ever did/should have…).

      Idiocy like this is why musicians will NEVER get out from under. Nobody even understands what’s going on.

      • Anonymous

        “the advances are money that Spotify – “Daniel Ek” – PAID TO the labels. No that he took”

        Huh? :)

        Let’s try another way:

        Nobody forced Daniel Ek to strike a deal that would screw the artists like they haven’t been screwed since Col. Parker.

        But Ek wanted the money — his cut, not the advances — so he took the deal and tried to hide the scam.

      • Hahahahahaha!..... God, You're DUMB!!!!

        How about we put it THIS way:

        Daniel Ek has NO RELATIONSHIP with the artists. He CAN’T screw the artists.

        Only SONY can do that. Sony is the ONLY party with a fiduciary relationship, a direct obligation to pay, the artists.

        The fact that people like you think Daniel Ek – or anyone OTHER than the record label – has ANY obligation to the record label’s artists is, again, why musicians continue to get totally fucked over – every time.

        You don’t even understand what’s going on….

    • Phantom X

      Over 250 billion in sales and so I’m not worried about offending my customers. I’m at the table with the devil before daylight learning the graduation trick–how to lug the cash to the house in the midst of these crackers and Jews–low down motherfuckers : spit spit and kiss my black ass ! Uncle Tom in the game too hiding and eating honkey shit with maggot sprinkles !

      • Common Sense

        Has this comment also been noted for offensive if not potentially law-breaking content or is it just facts you don’t agree with that get ‘duly noted’ for special attention by Moderators?

        Just askin’…

    • anon2

      Trust and Ek? I don’t that ever was something to take seriously. He’s a common criminal and racketeer full stop.


    Honestly,as much fun as it seems to be to bash the major labels, this is complete bullshit and everyone knows it. If you really believe that Spotify paid LESS THAN 42 MILLION DOLLARS in streaming fees to Sony during that contract period, you are deluded. In other words, there was no ‘extra’ cash that they pocketed and it was all shared with artists. If the artists are on a shitty royalty rate, so they only get a low percentage of every dollar generated, then that’s a separate matter entirely.

    • Anonymous

      Exactly. The artist is owed whatever their contract says they’re owed- an advance from Spotify to the labels doesn’t change that.

      There needs to be a mandated set royalty rate for streaming. It’s time to move beyond all this nonsense.

  3. Fair Digital Deals Declaration

    Almost a year ago, some 900 indie labels signed onto a publicly viewable agreement crafted by the global indie label trade organizations. The agreement outlined how these indie labels would treat their artists as it relates to digital revenues (including the non performance based portions such as equity, guaranteed revenue minimums and “flat money” or deal fees that get referred to as “advances” to obscure what they really are). It is called the Fair Digital Deals Declaration and EVERY artist signing to a label should be aware of it and see if they label they’re signing with is a signatory. Find an item about it here:

    I applaud heartily the coverage of this issue by DMN (and others) as the promotion of the digital licensing philosophies of the majors has been a cornerstone effort by trade orgs such as A2IM and Merlin for several years now but without the larger voice provided by outlets such as DMN it’s difficult to get traction where it matters – with the artists. I point you to this item on the A2IM site that is dated October 20, 2013 spelling out pretty plainly what the majors were/are doing with the streaming services (

    If Sony and Warner are sharing these non-performance derived revenues with their artists, great. It’s telling that Universal is mum on the topic, huh?!?! If Sony and Warner are telling the truth, every artist signed or distributed by those companies should be able to point to line items on their accounting statements pointing out the revenue and from where it was derived. It’s one thing to toss a few nickels into a general accounting statement that – technically – allows the label to say they’ve “shared” this revenue but it’s a wholly different thing for these labels to be transparent and act in a truly fair way whereas these dollars are concerned. I’ve zero doubt you won’t find one artist below, say, a Katy Perry type level who will be able to say that, yes, I can see specifically the flat money that has been shared with me by the major label who controls my songs.

    • DavidB

      Advance payment of royalties probably wouldn’t show up as a separate item on artists’s statements, as I pointed out in another comment. It makes do difference to the artist whether their royalty comes out of the advance or out of subsequent payments from Spotify to the label. There would only be grounds for a complaint if the advances were *not* being allocated (in the appropriate proportions) to artists’ accounts. No-one has produced any evidence that this is the case.

      • Anonymous

        @David, understand that contract language is often intentionally obtuse to make it difficult (or expensive or both) for challenges to be substantiated. Deal fees or flat money (not attributable to performances), equity positions & minimum revenue guarantees are all standard to the commercial terms of licenses constructed between streaming services and large content owners. If the terms were ALL payable to artists and distributed indie labels there’d be almost zero need for secrecy and non-disclosure agreements yet every direct license between a service and content providers are cloaked in them. Believe if you want that the majors are sharing all revenue fairly but ask yourself why these 900 indie labels decided the Fair Digital Deals Declaration was necessary (are they all just paranoid?) and ask yourself why the IMMF (among others) are pushing for greater transparency regarding streaming deals. And then, for fun, say outloud to yourself, “I believe the majors are treating artists and indie labels they distribute fairly” and see if that sounds likely to you.

        • DavidB

          You raise a point about the split between major labels and independents which may well be legitimate, but it is a different point. I thought the issue was whether major labels are giving a share of advance payments to artists or just keeping them for themselves. The labels (Sony, anyway) deny it, and I don’t know of any evidence to support the allegation that they do. The article you link to says ‘If the advance or minimum guarantees exceed the amount earned during the licensing period the label will earn “breakage” in excess of the earned amount’, but in view of the modest size of the advances paid to Sony that is unlikely to arise.

  4. smg77

    It’s nice to see this site finally focusing on the real bad guys: the labels.

    • Anonymous

      Again, nobody held a gun to Ek’s head.

      He took the deal and screwed the artists like there’s no tomorrow.

  5. DavidB

    If the ‘advance payments’ are merely advances of royalties, as appears to be the case, and if the actual royalties payable in the relevant period are greater than the advances, which also seems to be the case (at least with Sony), then there is no ‘surplus’ to be distributed. The money should all be credited to particular plays of particular tracks, and artists paid the appropriate amount in accordance with their contracts. If artists and managers are not seeing any additional payments in their accounts, this proves nothing, since it is precisely what one would expect in these circumstances.

    Incidentally, I have only just discovered that it is possible to see the number of streams of *all* tracks on Spotify. I knew already that the ‘Artist Profiles’ show cumulative play counts for ten ‘popular’ tracks, but for other tracks I thought that the only information publicly available was the graphic of ‘bars’ showing relative popularity. But I discovered accidentally that if you hover your cursor over these ‘bars’, it shows the actual number of plays, even for the non-‘popular’ tracks. So far as I can see this applies to all tracks on Spotify, though in some cases it just shows ‘<1000'. I don't think this has been publicised at all. On searching on Google just now I did find a report in Music:)Ally from late last year, but the writer was uncertain if the figures were available to all users. Well, there's nothing special about me, and I can see them! The figures seem to be updated at least every few days, so if you are really interested in how a particular artist is doing, you can check how many plays they are getting every week or month, etc.

  6. Someone

    Really? The issue of sharing advance breakage with artists seems only a matter of ethics and PR in this case where the payment can’t be associated w/ any artist. I don’t believe there is anything in the artists’ contract w/ each label that states that any revenue a label makes that is not related to the artist’s own product sales / licenses is something the label should share. Am I wrong? Do contracts today allow artists to have their hand in the cookie jar on ANY AND ALL income a label receives?

  7. Truancy

    The bottom line is that being on any major label in 2015 and for the foreseeable future is not a way to make money, it is a way to possibly get famous. Then you can maybe they can peddle products on social media / music videos for some dollars. These days, I find myself feeling sorry for my friends still on major labels. No major label artists are activists in this fight because they have signed away that right.

    Spotify is giving the people what they want. If you don’t like that they are getting rich….take away your best content and sell it exclusively somewhere else or take away all your content and go somewhere else. Independent artists should be revolutionizing their approach rather than getting angry that PEOPLE ARE ACTUALLY LISTENING TO YOUR MUSIC.

    Sure, streaming royalties are a joke…but even if they doubled, they’d still be laughable….and we sure as hell know they won’t be doubling anytime soon. If you’re independent, you don’t have to keep your music there forever….let it stream for a few months then take it away. If you don’t like the Spotify business model…don’t feed them your content. Let the majors have Spotify to themselves and people may reach to more artist-friendly services like Bandcamp for streaming and finding new music.

    Rejoice those are independent for you can go your own way.