American Idol-affiliated company 19 Recordings is suing Sony Music Entertainment for “unfair dealings with Spotify.”
Sony currently holds a 5% stake in the Swedish company aside from their royalty agreement. This is not uncommon—as a whole, the three majors have about a 20% stake in Spotify. What does this encompass? The companies make money off of channels that artists do not make money off of, such as advertising.
But is this legal? Can Sony profit off of Spotify without paying all profit participants? Sony’s defense thinks so. The music giant’s court papers reveal their defense, stating that Sony is not doing anything illegal. Sony is not required to do business that gives the absolute best royalties for 19 Recordings. Additionally, Sony’s stake in Spotify is not directly influences by 19 Recordings’ sound recordings. Sony must account for any specific recordings from 19, but no royalties must be paid for anything that does not concern that sound recording.
If Sony is taking potential royalties for artists from Spotify, the major is in a lot of trouble. However, is there actually an ulterior motive, or is Sony just using their power to make the company more profitable? If the latter is true, the company is just making smart business decisions with their money. No one can sue for that.
Sources:
http://www.billboard.com/articles/business/6605841/sonys-spotify-equity-artist-royalties-lawsuit-breakage
http://www.billboard.com/biz/articles/news/legal-and-management/6620425/sony-music-defends-spotify-payouts-process
Sony currently holds a 5% stake in the Swedish company aside from their royalty agreement. This is not uncommon—as a whole, the three majors have about a 20% stake in Spotify. What does this encompass? The companies make money off of channels that artists do not make money off of, such as advertising.
But is this legal? Can Sony profit off of Spotify without paying all profit participants? Sony’s defense thinks so. The music giant’s court papers reveal their defense, stating that Sony is not doing anything illegal. Sony is not required to do business that gives the absolute best royalties for 19 Recordings. Additionally, Sony’s stake in Spotify is not directly influences by 19 Recordings’ sound recordings. Sony must account for any specific recordings from 19, but no royalties must be paid for anything that does not concern that sound recording.
If Sony is taking potential royalties for artists from Spotify, the major is in a lot of trouble. However, is there actually an ulterior motive, or is Sony just using their power to make the company more profitable? If the latter is true, the company is just making smart business decisions with their money. No one can sue for that.
Sources:
http://www.billboard.com/articles/business/6605841/sonys-spotify-equity-artist-royalties-lawsuit-breakage
http://www.billboard.com/biz/articles/news/legal-and-management/6620425/sony-music-defends-spotify-payouts-process
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