Spotify the difference: Why the streaming giant's IPO will affect labels' relationships with artists

Spotify the difference: Why the streaming giant's IPO will affect labels' relationships with artists

I do hope you didn’t eat too much chocolate over the Easter break. Because the music biz is going to need to find some room for popcorn as we watch Spotify’s IPO unfold this week.

The prospect of the world’s biggest music streaming service going public holds lots of potential ramifications for the industry, as our report in the latest issue of Music Week illustrates. But Daniel Ek and co aren’t the only ones who should be pondering the future this week.

Because how the biz distributes its dividends from the Spotify float will do an awful lot to frame its relationships with artists in the years to come. All three majors and Merlin have pledged to share any windfall from selling their equity stakes with their artists and label members, and some companies have also pledged to pass on money to distributed labels.

So far, no one is saying when, or even if, they plan to actually sell those stakes. Timing will, of course, be pretty crucial; with a potential $20 billion+ valuation, selling too early or too late could conceivably cost those artists a small fortune.

But that’s not even the trickiest part. The basis on which money is distributed will be enough to test the finest strategists (and accountants) in the biz. Do you divvy up the cash on the basis of current performance, or over the entire time that the stakes have been held? How do you compensate a newer artist with a few streaming megahits versus a heritage act with a vast catalogue that ticks over nicely? And so on.

No one’s expecting it to be easy, but it’s going to require a whole new level of transparency and cooperation from labels. After all, this is a process that not only needs to be done, but needs to be seen to be done. Pass the popcorn please…

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