Major labels extract advances and audit rights artists lack in streaming deals

Evidence

One such limited peek into these hidden negotiations occurred when a 2011 contract between Sony and Spotify was leaked to the media, revealing some of the key perks extracted by the big labels. The first is substantial advance payments (in this case, $42.5 million over three years) for access to their catalogs. Whether or not these payments are shared with artists is debatable; only after the report leaked did labels claim that they are, though they offered no evidence, and industry sources claimed otherwise. Without transparency and audits, no one can be sure, though the recording industry’s countless legal battles over unpaid royalties and payola over the years do not foster much trust. … Lastly, a key feature of the leaked contract was a “most-favored-nation clause,” meaning that Sony was entitled to increased payment if any other labels negotiated better deals and the right to conduct an audit as proof. There is perhaps no clearer signal of the imbalance in the recording industry than the fact that the major labels have the right to perform audits to extract more money, while artists are unable to perform audits in order to find out why they make so little. — Andrew deWaard, Derivative Media, 209

Categorization

• QUESTION: The most-favored-nation clause among majors — does that collude to keep artist shares uniformly low across all labels? Worth chasing whether MFN clauses propagate pricing upstream or downstream.
• SEED: The asymmetry of auditing rights — labels audit each other and platforms, artists can’t audit labels — is a crisp empirical hook for an essay on information asymmetry as the real mechanism of artist exploitation.