Specialist
Former Manager at Spotify AB
Agenda
- Publisher and label rights dynamics across Europe and the US
- Impacts on Spotify (NYSE: SPOT) from CRB (Copyright Royalty Board) decision to raise US publisher rates
- Royalty rates development for payments to major and independent labels
- Impact of minimum guarantees as part of licensing agreements
- Spotify's ability to negotiate lower headline rates and mitigate other onerous clauses
Questions
1.
What are the interesting dynamics in the relationships that Spotify and other DSPs [digital service providers] have with labels, the relationships labels have with artists and the relationships that artists increasingly have directly with Spotify and other DSPs?
2.
What are the basic mechanics around podcast monetisation for Spotify? Who gets paid? Why is the distinction between licensing or publisher rates and record label rates important?
3.
A certain percentage of the average subscription is paid to the publishers and there’s typically a rights organisation that will manage that. That rate is typically regulated depending on the market. I think it’s going up to 15% from 12% per some CRB [Copyright Royalty Board] announcements. Is that multi-year contract fixed based on the discussions that individual labels have with Spotify?
4.
Do publishing rates typically follow the US, given that it is the largest, potentially most regulated market? Do most markets follow that benchmark or are there significant differences in publisher rates?
5.
Have European markets historically followed the US on publisher rates?
6.
Do you think there’s anything that we could infer from deals such as Universal’s purchase of Bob Dylan’s catalogue? It spent a significant sum of money, but I believe that was a publisher rather than a record label deal. Do you think that represents labels hedging themselves on the record label side in anticipation of rates going higher on the publisher side?
7.
Is the publisher still paid out a percentage of revenue generated by the particular DSP in a given accounting period? Say a DSP generates USD 100. This is presumably paid to the society or whoever represents all the publishers in a given market. They get 12-15% based on where CRB rates are heading. The DSP has USD 12-15 to share among all the different publishing rights-holders. Are the publishers then paid out of that USD 12-15 based on the market share of the artists they have the publishing rights for? Is that how it works?
8.
Do you think pressure on artist rates and the negotiations artists are having with labels will impact label economics in the near-to-mid-term? What do you think of the risk that artists are increasingly able to leverage tools that help them build their own brands, distribute directly through online platforms and get higher rates from labels?
9.
There is theoretically infinite shelf space now, whereas historically there were only a finite number of slots on the radio where you could get a track played. What is the average artist rate now? I’ve been working with the assumption it’s around 20% of artist revenues, and they are paid a percentage of the label’s total revenue rather than a percentage of streaming revenue. Is that correct?
10.
How does a distribution-only deal compare to a normal record label deal we would typically associate with the industry?
11.
Would you say it’s unlikely there will be much scope for record label rates to move again in favour of labels?
12.
Do podcasts fundamentally alter the balance of power or the commercial dynamics between record labels or master rights holders, publishers and DPSs? A lot of people were very excited by Spotify’s diversification into non-music audio. Do you think that will move the needle?
13.
Do you expect Spotify to monetise podcasts by increasing the subscription price and retaining the increase exclusively to pay for podcasts and keep labels happy with their existing deals? How can Spotify monetise podcasts without changing the restrictive licencing deals it has with labels?
14.
Would Spotify use Premium to justify a lower rate to podcast owners or the master rights holders of podcast content?
15.
I believe the agreements between labels and Spotify mean that the fixed percentage of the subscription amount agreed between the DSP and the label all goes into the pool. If I was a subscriber who’d consumed 100% podcasts and paid USD 10, 50% or 55% of that USD 10 would still go into the label pool. Is that correct?
16.
Why is royalty-free significant for DSPs? What opportunities do you think that presents?
17.
Would there be any incentive for labels or publishers to make catalogues available for royalty-free sync licensing?
