(AllHipHop News) In a relatively short amount of time streaming has become the most vital part of the music industry. Last year saw streaming profits overtake CDs sales for the first time, which explains why companies like Spotify, Beats Music, Pandora, and Tidal are actively battling for market share.
While the streaming services are set to make a lot of money, there have always been complaints that artists are being shortchanged in the new music profit revolution taking place. That perceived unfair financial exchange between streaming companies and content creators was the reasoning behind Taylor Swift's decision to pull her catalog from Spotify and the stated purpose of Jay Z recruiting some of the biggest stars in the world to invest in Tidal.
Most of the information about the deals between the streaming services and the music labels have been kept secret, but The Verge obtained a copy of Spotify's contract with Sony Music. The website laid out the details of the contract.
Spotify was to receive 5 percent "off the top" from select ad sales revenue, Spotify paid $42.5 million in advances to Sony, and Sony was guaranteed something called a "Most Favored Nation" clause. The latter section ensured that Sony got a better deal than any other label during the length of the contract.
Spotify was also stipulated to pay $0.00225 per stream with a possibility of it rising to $0.0025 per stream for revenues from its free tier. 75% of Spotify's 40 million users opt for the free service.
But what about the artists' cut? The Verge reports:
Sony Music is likely getting considerable payouts from Spotify each year, but what it does when it gets that money — and how much of those payments actually make it down to the artists — is still unknown. Some artists have clauses in their contracts to get a larger share of the streaming revenue, and some artists are still operating under CD-era contracts that only give them 15–20 percent of their streaming revenues.
Aloe Blacc became the poster child for modern artists effectively being left out of the music streaming profit-sharing model. Blacc wrote an op-ed where the singer-songwriter revealed he only made $4000 from Pandora for his work on Avicii’s “Wake Me Up!" The song was streamed over 168 million times in the United States.
Jay Z brought up Blacc's situation during his discussion with students at New York University’s Clive Davis Institute of Recorded Music. The Hip Hop representative suggested his new Tidal platform's payout to artists would be different from competitors like Pandora and Spotify.
"You guys may have seen some of the stats like, Aloe Blacc had a song that was streamed 168 million times and he got paid $4,000," said Jay. "For us, it’s not us standing here saying we’re poor musicians. If you provide a service, you should be compensated for it. And not just artists — just think about the writers and the producers."
Jay has speculated the disparity between Tidal's royalty payout and other streaming services' royalty payout have led to a "smear campaign" against his company. His NYU presentation also consisted of Jay stating one of the goals for Tidal is to force other streaming services to increase their revenue sharing with the musicians.
"If just the presence of Tidal causes other companies to have better pay structure, or to pay more attention to it moving forward, then we’ve been successful in one way," Jay added. "So we don’t really view them as competitors. As the tide rises, all the boats rise."
Recently, a supposed copy of Tidal's royalty statement was uploaded to the internet. The document claimed Tidal pays out twice as much as Spotify. However, a Tidal representative told AllHipHop.com that Tidal's royalty per stream was $0.024 - $0.028. That is close to ten times Spotify's free tier per stream payout listed in the Sony Music contract.