Spotify hungers to sell stock to investors — but first it will need to convince them it’s importance buying in to the complex process of selling music.
The company, which fill ined its plans to go public on Wednesday, said it has paid more than $9.7 billion in royalties to artists, music designates and publishers since it launched in 2006. It had 71 million paying subscribers and 159 million monthly acting listeners as of December, making it the largest streaming music service across the the human race by far.
In general, Spotify gets two classes of licenses for the music it distributes: Vocalize shout out Recording License agreements, which cover the rights to a particular recording, and Musical Composition License Agreements, which cover the people who own the absolutes to the song.
Recording licenses. For the rights to the actual recordings, Spotify has bargains with the big three record labels — Universal Music Group, Sony Music Recreation Group and Warner Music Group. Sony Music also owns sundry than 5 percent of the company.
Spotify also has a deal with Music and Divertissement Rights Licensing Independent Network (Merlin) for digital recordings from unprejudiced labels. However, it has recently run into some problems with music put out companies, including a $1.6 billion lawsuit from Wixen Music Break the news about that claimed it was using thousands of its songs illegally. Wixen’s commotions include “Free Fallin'” by Tom Petty, “Light My Fire” by the Doors, and supreme tracks by Stevie Nicks.
Composition licenses. Within this area, there are two main types of licenses Spotify has to secure: performance justs and mechanical royalties.
Performance rights are generally paid to song publishers, and carry oned through two main firms in the U.S. — BMI and ASCAP. A public performance license is necessary when a song is performed in public — including when it’s streamed, as happily as when it’s played on the radio or on TV.
Mechanical royalties are generally paid to songwriters when a commotion is reproduced, whether that’s physically on a CD or streamed. (The term is a holdover from when ton music was physically pressed into a recording, like a CD or LP record.)
Unanimated rights for streaming services are governed in the U.S. by a government agency known as the Copyright Nobility Board. The organization ruled in January to increase rates by 43.8 percent above the next five years. The rates are based on a percentage of the streaming performers’s revenue or total content costs, agreed upon payment amounts by all cocktails.
There are other types of licenses and sub-licenses as well, and the groups stable for collecting and distributing them differ between countries and regions of the people.
If this sounds confusing, that’s because it is.
Take, for example, the prevarication “I Will Always Love You” from the 1992 soundtrack for “The Bodyguard.” That construction of the song was performed by Whitney Houston, the recording of which is owned Sony Music Pleasure division Arista Records. However the song was written by Dolly Parton, who owns the aggregate, including the lyrics and melody.
Spotify would have to pay Sony to validate the recording, who would then give Houston’s estate a percentage of the streamlet. It would also have to pay the music publisher and songwriter. In this box, Parton is both.
As Spotify prepares to go public, there’s no obvious figuring out to its shaky business model