During the company’s earnings call yesterday, Warner Music CEO Sam Cooper said that if the company ever receives a payment from Spotify as a result of the company being sold or going public, it will share part of that sum with its artists, Re/code reports.
“Today, we are confirming that in the event we do receive cash proceeds from the sale of these equity stakes, we will also share this revenue with our artists,” Cooper said. Warner Music is the first — and currently, only — company to make this type of promise.
Like many of the other major record labels, Warner owns small stakes in Spotify and SoundCloud, which are normally acquired as part of licensing deals for the labels’ music. Since the very beginning of these types of services, artists have complained that they aren’t being paid enough, while labels who own stakes in the streaming companies stand to profit twice. The move from Warner would go some way toward satisfying both complaints.
Spotify is currently valued at more than $8 billion, so even a small stake in the company could be worth a lot. Warner’s own stake could be worth hundreds of millions of dollars. Of course, this doesn’t necessarily mean a huge payday for artists.
In the event that Warner Music did receive this windfall from Spotify, it would use the same formula used to pay artists now. Since the formula is based on usage, less well known artists wouldn’t see much of a benefit. Even larger artists likely wouldn’t see huge sums, given the sheer number of artists the money would be split between.
Still, given the complaints about payments from Spotify, any extra sum would likely be welcome. The company is currently facing two class-action lawsuits, both of which involve alleged unpaid royalties. Late last year Camper van Beethoven and Cracker frontman David Lowery filed the first $150 million lawsuit, while the second suit, this time for $200 million, came just over two weeks later from artist Melissa Ferrick.