Sony Music Makes $$ from Spotify

WRITTEN BY: LIZ HUNTER

One of the biggest questions regarding Sony and their contract with Spotify is how much Sony Music gets paid per stream. And well, according to The Verge it’s pretty complicated.

In the contract, there is a section outlining how Sony Music split its label fees into three different sections: the ad-supported fees, online day passes (which no longer exist, and Spotify’s premium service. In each of the three sections, Sony is able to profit a share fee of 60% of Spotify’s monthly gross revenue, multiplied by Sony’s Music’s percentage of overall streams. The Verge gives this example: if Spotify earned $100 million in gross revenue, the labels would would get $60 million. If Sony Music made up 20 percent of the streams, it would take home $12 million.

However, the contract includes what’s known as the usage-based minimum and per subscriber minimum, which are two different formulas that allow Sony Music to earn even more money from Spotify. The Verge says that, “if the royalties from usage in any particular month are greater than what is paid out by the revenue share, Sony Music gets that amount instead.”

Also, the contract states that Spotify must pay $0.00225 per stream, due to a discount that lasts for the length of the contract. However, if the growth targets are missed in the previous month, that number could rise to $0.0025 per stream. These rates, according to The Verge, are only relevant if the usage-based minimum exceeds the revenue sharing model.

SOURCES:
http://www.theverge.com/2015/5/19/8621581/sony-music-spotify-contract
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