The Spotify IPO filing demonstrates the complexity of music rights licensing

 The Spotify IPO filing demonstrates the complexity of music rights licensing

The Spotify IPO filing demonstrates the complexity of music rights licensing

Since its 2006 start, Spotify claims to have paid out $9.76 billion in royalties to authors, music labels, and artists.

Spotify is granted both mechanical and public performance rights to songs.

This has to guarantee payment to the publisher, composer, and recording artist in addition to the music artist.

In order to sell investors shares, Spotify must first persuade them that it is worthwhile to invest in the convoluted music distribution process.

The firm said on Wednesday that it has paid out over $9.7 billion in royalties to publishers, music labels, and artists since its founding in 2006. It boasted 159 million active listeners per month in addition to 71 million paid customers. It surpassed all other streaming music services in the globe in December.

For the music it releases, Spotify typically obtains two kinds of licenses: sound recording licensing agreements, which protect the rights to a specific recording, and musical composition license agreements, which protect the rights of singers.

Recording Permit. Spotify has agreements in place with the Big Three record companies, Warner Music Group, Sony Music Entertainment Group, and Universal Music Group, for the rights to the actual recordings. Sony Music also has a majority share in the business.

Additionally, Spotify has an agreement for digital recordings from independent labels via Music and Entertainment Rights Licensing Independent Network (Merlin). But lately, it has had some issues with music publishing houses; Vixen Music Publishing, for example, sued it for $1.6 billion, claiming that it was utilizing thousands of its songs unlawfully. Was. Some of Stevie Nicks's songs, "Light My Fire" by The Doors, and "Free Fallin'" by Tom Petty are among the songs on Vixen.

License for Creation. Spotify has to get mechanical royalties and performance rights in order to be included in this category.

Song publishers are usually compensated for performance rights, and in the U.S. These are overseen by BMI and ASCAP, the two main companies. Any time a song is performed in public, whether it be on TV or radio, streamed, or both, a public performance license is needed.

When a music is streamed or physically copied onto a CD, composers usually get mechanical royalties. (The phrase is a throwback to the days when most records were physically pressed on discs, such as CDs or LPs.)

In the United States, mechanical rights for streaming services are accessible. The Royalty Board, an organization under government control, oversees copyrights in the United States. In January, the group decided to raise fees by 43.8 percent over the next five years. Rates are determined by taking into account the whole cost of material or a portion of the streaming company's income, and the parties agree on a payment amount.

Other kinds of licenses and sublicenses exist as well, and different nations and areas of the globe have different organizations in charge of obtaining and distributing them.

This is the reason for any confusion this may bring

Consider the tune "I Will Always Love You" from "The Bodyguard"'s 1992 soundtrack. The recording of Whitney Houston's performance of the song is held by Arista Records, a part of Sony Music Entertainment. Nonetheless, Dolly Parton wrote the song and is the owner of the composition, which includes the melody and lyrics.

In order to get a license for the recordings, Spotify would have to pay Sony, which would give the Houston property a portion of the stream. This will also cost the lyricist and music publisher. Parton is both in this instance.