Thread by @future_of_music

The answer is 6-7%. Fascinatingly, most respondents dramatically overestimated the amount.

https://twitter.com/future_of_music/status/1425893948736802818

For a while, all 3 majors and Merlin (a rights aggregator representing independent labels) had equity totaling close to 18%. But those numbers went down after more investment rounds. Merlin and Warner sold off their equity post-IPO. Sony eventually sold half of its stake.

So now it’s just Universal and Sony that have small stakes in the company. Now, you might ask, “does that mean these companies get 6-7% of my monthly subscription?” It’s complicated, but that’s a different pool of money.

Subscription revenues are divided up with a substantial percentage of revenues going to pay for licensing fees for sound recordings and compositions, based on overall track play count. That used to be about 70%, reports indicate it’s gone down since then, closer to 66-67%.

That 66-67% is divided up between sound recordings (money that goes to labels & artists) and compositions (money that goes to publishers and songwriters.)

Equity isn’t directly about revenue. It’s about the overall company value. Even when a company is profitable, it isn’t necessarily distributing dividends to investors.

Now, a recent WIPO report argued that valuation and other elements should be taken into account when reporting out how much of the benefits of streaming are making it to artists. @UMAW_ did a good job of summarizing that here: unionofmusicians.org/un-report

Rolling Stone had a good report last year on who actually owns Spotify. rollingstone.com/pro/news/who-r… (note that there may be a tiny bit extra label ownership via label stakes in Tencent.)

Finally you might ask “does that mean that the major labels have 6-7% control over how Spotify works, how it’s structured and how it operates?” The answer is “not directly”. As Rolling Stone reported, voting power is allocated differently among shareholders from ownership.

At the time of the RS report, Spotify founders Daniel Ek and Martin Lorentzon had 77% of voting power. Labels may still have some leverage because they control valuable catalog that Spotify needs. But at this point, they absolutely depend on Spotify for access to audiences.

One reason this matters: there’s sometimes an assumption that aspects of Spotify that indie artists don’t like must be because major labels want it that way. It’s an easy assumption to make, but it overstates how much control majors actually have over Spotify decision making.

For example, major labels today generally don’t like payola systems like Spotify’s Discovery mode! They are better able to make things work in environments where payola exists than indie labels and self released artists, but that doesn’t mean they appreciate the practice!

None of this is to let major labels or any other industry player off the hook. But understanding who really wields power and where helps us find places where common ground can be found. One of those places: nearly everyone agrees that payola sucks!