Spotify Contract Leaked

Musicians have questioned their paltry royalty payments from the Spotify streaming music service – a concern that ultimately led to the U.S. launch of the Tidal streaming service. However, it appears there is money to be made from Spotify but it goes to the record companies, not the performers.

The Verge recently uploaded a contract signed by Sony and Spotify in January 2011, prior to Spotify’s U.S. launch. The Verge has taken down the contract “as a courtesy to Sony,” which itself called the contract “an illegally obtained, out-of-date document.” Spotify declined to comment to the New York Times on the matter.

The 41-page document includes up to $42.5 million in advance payments and a $9 million advertising credit to Sony. There is a formula for royalty payments to Sony and a “most favored nation” clause that will up Sony’s rates in case Spotify signs a contract with a competitor that is more favorable than the Sony contract.

The leak inspired the International Music Managers Forum to write an open letter that said there should be “an obligation for transparency” between labels and artists. Meanwhile, Sony has been taking music off of SoundCloud, which caused one of its artists, Madeon, signed to Columbia, to complain because he considers SoundCloud “a great discovery platform.” “Well done Sony for holding your own artists hostage,” Madeon tweeted.