Warner Music Group revealed Thursday it will share with artists any proceeds from the sale of Warner's equity in a music streaming company. Warner has a stake in Spotify, which is often rumored to be preparing for an initial public stock offering, and Deezer, which last year abandoned its planned IPO.
Warner CEO Stephen Cooper brought up the once-hot topic during Thursday's earnings call. "Although none of these equity stakes have been monetized since we implemented our breakage policy, today we are confirming that in the event we do receive cash proceeds from the sale of these equity stakes, we will also share this revenue with our artists on the same basis as we share revenue from actual usage and digital breakage," Cooper said.
A Warner representative explained to Billboard the policy regarding equity proceeds falls under the same policy to share revenue, established in 2009, that also covers "digital breakage," the term for 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. Warner takes the same approach when paying artists' shares of the settlement with SiriusXM Radio over pre-1972 recordings, the representative said. Those revenues are shared with artists through SoundExhancge, under the same conditions as other revenue generated by SiriusXM.
A long time complaint of the artist community, the controversy over breakage heated up after last year's leak of a Spotify licensing contract with Sony Music. The contract called for Spotify to pay a minimum guarantee that may exceed the royalties Sony would have otherwise received from the service. Following the leak, Sony's top digital executive, Dennis Kooker, sent an email to Sony employees that said "virtually all" of the advances received under that 2011 contract were allocated to artists. Sony later explained to Billboard 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."