Sony Music: We'll Also Share Potential Spotify Windfall With Artists
Sony Music Entertainment has followed up this week's revelation that its fellow major, Warner Music Group, plans to share with artists any proceeds from the sale of the company's equity in a streaming company. In a statement also released on Thursday, Sony said that a similar policy on breakage — revenue that is not officially designated for artists — is already in place.
"As we have previously shared with our artists and their representatives, net proceeds realized by Sony Music from the monetization of equity interests that were provided to Sony Music as part of the consideration for a digital license will be shared with our artists on a basis consistent with our breakage policy," the label group said.
Like Warner, Sony owns an investment stake in leading music streaming service Spotify, which is rumored to be preparing for an initial public stock offering. WMG CEO Stephen Cooper said in a Thursday earnings call that "in the event we do receive cash proceeds from the sale of these equity stakes [in Spotify or another service], we will also share this revenue with our artists on the same basis as we share revenue from actual usage and digital breakage."
The term “digital breakage” in the music industry refers to the difference between the minimum guaranteed royalties owed to a label and royalties accrued in the normal course of business. These revenues are shared at the same rate that artists are allocated their share of streaming royalties.
Sony found itself in a controversy over breakage last year following the leak of a Spotify licensing contract that called for Spotify to pay a minimum guarantee that may exceed the royalties Sony would have otherwise received from the service. Sony later explained that under its breakage policy it shares with artists "all unallocated income from advances, non-recoupable payments and minimum revenue guarantees that Sony Music receives under its digital distribution deals."