Are Recording Artists Being Excluded from Spotify Income?

Conflicting information flies about as to the price paid by 4 major record labels and label Merlin for shares in the streamed music service Spotify. The UK's industry weekly, Music Week, finally covered the conundrum this week.

The Washington Post had already published the respective holdings of Spotify shareholders on 7 August, including information drawn from Swedish news site Computer Sweden. This "unverified capitalization table information, reportedly based on a filing in Luxembourg where the company is headquartered" shows that the labels, Sony/BMG, Universal, Warners, EMI and Merlin collectively own 17.3% of Spotify and that they paid approximately 100,000 kroner (a little shy of ten thousand Euros), a fraction of the price paid by venture capital funds North Zone Ventures and Creandum.

Now why is this so interesting?

Record labels usually require hefty upfront licence fees from tech startups wishing to exploit the labels' catalogues of copyright recordings. These fees are often too steep for a start up. So, have the majors and their more modestly sized wizard chum, exchanged a licence to exploit their catalogues for shares in Spotify? And if so, will the artists be paid for their recordings streamed on the Spotify site?

Artists are paid royalties usually expressed by reference to monies "directly and identifiably" arising from the exploitation of the copyright sound recordings which are the subject of the record deal. If the shareholding information is correct and the labels are not receiving licence fees, all the labels earnings from Spotify will go straight to their bottom lines - with no participation in the money by the artists whose recordings are being streamed.