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It doesn’t mean much now. It may mean something later: One of the world’s biggest music labels says that if Spotify ever goes public — or gets acquired — it will share the windfall it will reap with the artists who helped make the windfall possible.
During Warner Music’s earnings call this morning, CEO Steve Cooper made a point of promising his artists that Warner would distribute some of the payday it would see if Spotify — or any of the other music streaming services it owns a piece of — goes public or is sold.
Warner, along with the other big music labels, owns minority equity stakes in services like Spotify and Soundcloud; it typically acquires those stakes as part of licensing deals.
“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 in his prepared remarks.
The comments are a new wrinkle in the ongoing debate about how music makers and music owners will make money as the industry finishes its transformation from physical to digital revenue, and from an ownership model to free and paid streaming services.
For many years, artists have complained that they don’t see enough money from streaming services like Pandora and Spotify. And they’ve also complained that music labels are essentially getting paid twice by those services: Once when Spotify and others distribute streaming revenue, and eventually again, when those companies sell and the equity stakes become worth real money.
Warner, for instance, may own a stake worth several hundred million dollars in Spotify, which investors have valued at more than $8 billion. Spotify hopes it will be worth more if it goes public or sells.
Warner has now become the first major music label to say it will share some of that second payment, in the event it happens.
That’s interesting. But unless you’re a very, very, very popular artist, like Warner’s Coldplay, it’s unlikely to mean a lot, since Warner will use the same payment formula it uses to pay artists for the use of their music today, which is based on usage.
Warner Music’s announcement does seem like a thumb in the eye of Sony, which is fighting a lawsuit that argues that its own royalties + equity plan amounts to illegal double-dipping. And perhaps the label thinks it will help it lure or keep a big artist on its roster.
In any case, it’s hard to argue with the sentiment: Neither the labels nor the streaming services are worth anything without the people who make the music they own and play. Giving them more money can’t be a bad idea.
This article originally appeared on Recode.net.
