Warner Music Group recently sold all of its stake in Spotify for $504 million, and everyone expected that money to go right to the company’s bottom line and bypass its artists. That’s not the case though as Warners announced that it would allocate 25% of that income back to artists.
Sounds like good news, right? Well, it is, but it’s not as rosey a prospect as you might think. The proceeds will be used to cover artists unrecouped balances, which means that if an artist owes the company money thanks to advances received, it will go towards paying that balance off first. This means that a substantial amount of that 25% will still be staying in the hands of Warners.
While the offer to share some of the windfall is somewhat unexpected, it’s still not as generous as Sony Music was when it sold its its Spotify stock recently. All of the money allocated to artists wound up in their pockets and none of it was used to cover unrecouped advances.
Still, if an artist has less of a debt to pay back to the record label, the sooner they’ll see some real royalties, which is what everyone wants. That said, it’s still unclear as to how that money will be divided between artists on the label. Will each artist get an equal share of the revenue, or will it be pro-rated based on the agreement that they signed?
It’s been estimated that Warner Music Group owned about 4% of Spotify stock, which was diluted down to 2% when the streaming service went public in April. The stock didn’t come from an outright investment in Spotify but was a part of the long-term licensing agreement that the company needed to do business. It turns out that part of the agreement paid off handsomely for all the major labels and their artists.