Daniel Ek, C.E.O. of Spotify. A leaked 2011 contract between Spotify and Sony, added to the debate on how labels pay artists for streaming, and how much control labels have over streaming sites.

SoundCloud Strategy & Leaked Licensing Contract is a PR Problem for Sony, Spotify

Daniel Ek, C.E.O. of Spotify — photo credit: Shannon Stapleton/Reuters

Tech website The Verge last week leaked a 41-page licensing agreement from 2011 between Sony and Spotify that shed light on some of the ways that Sony keeps their Spotify revenue growing, and some of their strategies have been met with a less-than-cordial reception by a number of artists and the International Music Managers Forum. But that was just the start to what’s turning out to be a bad week for the the second-largest record company in the world.

Last week, news broke that Sony is planning to take down Madeon’s music from SoundCloud, the platform largely responsible for launching Madeon’s career. SoundCloud’s popularity stems from how easy it is to share and embed in social media, but a large portion of the music hosted there is unlicensed, making the streaming platform popular with users, and unpopular with corporate rights holders — from whom SoundCloud is now seeking licenses.

“Lots of love for my label Columbia of course, they’re great, less love for Sony Corporate’s disconnected-from-reality strategy,” said Madeon, a french DJ signed to Sony imprint, Columbia, about Sony’s approach to SoundCloud.

But apart from harsh words from their own artist, the leaked licensing agreement has the potential to do the most damage to Sony’s image. Among the contract specifics:  Sony Music was paid nearly $42.5 million in advances by Spotify, and Sony is using a most favored Nation clause to keep those advances rising as Spotify grows.  It is unclear to what degree Sony Music shares those advances with its artists beyond the earned royalty payouts covered in each artist’s contract with the label.

Anyone closely following the transformation of the music business will not be surprised by these “revelations.”  As I said to Ben Sisario in his New York Times coverage of this story, “This industry has struggled with public opinion, and this story doesn’t help.”

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via The NYT & The Verge