Spotify made its debut on the New York Stock Exchange today, opening at a price of $165.90 per share – giving the streaming service a market cap just under $30 billion, nearly four times the company’s valuation as of its last round of funding. The move has sent the fortunes of Spotify’s founders and investors soaring in lockstep. So will the musicians on whose backs the service was built see a similar windfall?
The short answer: Not yet. The longer answer is a bit more complex. While negotiating access to the rights needed to enter the U.S. market in 2011, Spotify gave away a large chunk of equity to record labels. After Forbes noted the issues with that arrangement in 2015, the majors separately promised they’d compensate artists in the event of a public listing.
Now that Spotify is trading on the New York Stock Exchange, the labels continue to insist that musicians will get a slice of spoils from the streaming giant’s debut. At the moment, though, the three majors—which collectively hold billions in Spotify equity—are long on promises and short on details. A rep from Warner Music Group referred me to a two-year old quote from its CEO affirming the company’s intention to compensate acts, while a Sony spokesperson also sent a previously-released statement.
“Sony Music and The Orchard are committed to sharing with their artists and distributed labels any net gain they may realize from a sale of Sony Music’s equity stake in Spotify,” reads Sony’s explanation. “This is consistent with our previously announced policy of sharing breakage and equity proceeds from digital catalog licenses with our artists and distributed labels.”
Representatives from Universal Music Group, the third and largest major label, did not immediately return a request for comment; a Spotify spokesperson referred me back to the record companies. Beyond the statements offered, none of the majors would elaborate on the record about their plans.
Reading between the lines in Sony and WMG’s statements, it seems the labels will only give artists a piece of the Spotify windfall if and when they sell their shares. That may happen sooner rather than later, especially if artists start clamoring for answers.
If and when that occurs, it seems likely that some amount of cash will be distributed by the record companies to the artists according to a formula much like the one that determines how miscellaneous chunks of music-related money get passed along.
But the record labels have received a fair amount of criticism over the years for the way they deal with such “black box” money. Treating the sale of Spotify shares the same way isn’t necessarily going to go over well with artists—in the end, it seems like just another chapter in a familiar tale.
As Rock and Roll Hall of Famer John Oates told me: “That’s the story of the music business … take it back to, ‘Give him a bottle of wine and take all his publishing for the rest of his life.'”
First Appear on Forbes