Labels accept low artist royalties because their equity gains outweigh them

Evidence

A lawsuit brought by 19 Recordings (an American Idol–affiliated record label representing artists such as Kelly Clarkson and Carrie Underwood) alleged that Sony acquired its equity stake and advertising income from Spotify in lieu of negotiating fair-market royalty rates. … In essence, the Big 3 have a compelling financial incentive for accepting low royalty rates for their artists: it benefits the streaming services, which the labels have equity stakes in. Rather than sharing profit with their artists directly through royalty rates, they wait for a large payout through IPO or acquisition, which will not need to be shared with the artists. — Andrew deWaard, Derivative Media, 216

Categorization

• XREF: This is the precise causal inversion the reader is hunting: royalty suppression is rational given equity upside — the ownership structure actively shapes the deal terms that determine what artists earn.
• SEED: Article angle: ‘the IPO as the new royalty’ — how equity replaces per-stream revenue and rewires which artists and genres get signed and promoted.
• QUESTION: If low royalties are rational because of equity, does the equity dependence change which artists (and hence which music) labels choose to develop and promote?