This could get messy, labels are uniting against Spotifys new direct deals with artists. Well why would they be happy, they are been cut out!
The top dogs at Universal, Sony and Warner are very unhappy about Spotify starting to directly license artists and pay them advances.
The majors are so angered by Spotify’s move, they’re considering something of a nuclear option: blocking new territorial licenses so that Daniel Ek’s service won’t be able to see through its plans to launch in India and beyond this summer (Spotify plans to roll out its service in India – first in beta, and then publicly – in the coming months).
To grow in new territories Spotify need the backing of the-big three labels, and this is not forthcoming.
“We already have multiple, very strong partners in all of those markets,” a very senior, US-based source at one of the majors told us yesterday.
“It is up to Spotify to convince us why we should help them compete. And right now, for obvious reasons, we don’t feel very convinced.”
They added: “We are seriously considering [not licensing]India.”
A key exec within the global HQ of another major told us that blocking Spotify’s India launch would be “just the tip of the iceberg in terms of our response options”.
And a high-up corporate figure at the third major – when told that their two key rivals were mulling a licensing block in India – responded: “Ditto. We all know that, without these markets, Spotify’s global market share simply won’t grow.”
In the same month, Saavn, one of the leading music streaming companies in India, announced that it was being merged with rival service JioMusic in a deal that valued the newly-combined platform at over $1bn.
That move was masterminded by Reliance Industries Limited (RIL) – one of India’s largest private corporations which boasts an annual turnover of more than $50bn.
Here is what is at the core of the argument:
Typically, says Billboard, record labels are paid a 54% (this ranges from 52-55%) per-stream share of Spotify revenue.
If an artist was on a standard 80/20 deal with a label, they would ultimately get 20% of this 54% revenue share – ie. a net per-stream share of about 11%.
Even if an act’s label royalty was as generous as 50/50, they would still only get a net revenue share of 27% (ie. half of 54%).