Major record labels aren't known for being particularly generous to their artists, but in at least one case, that might change a little. Warner Music has made it known that should it ever sell its stake in Spotify, at least some of the proceeds will go to its artists, according to a post on Music Business Worldwide. WMG CEO Stephen Cooper made the announcement when speaking to investors yesterday.
This is an unprecedented step as any income from these types of equity sales have traditionally made their way directly to the label's bottom line in the past, bypassing the artists.
The major labels own around 15% of Spotify, which came as part of the company's negotiations for licensing rights to the major label's catalog. It's estimated that WMG owns between 2 to 3% of Spotify, which at its current $8 billion valuation, is worth around $200 million.
Spotify has signaled its intention for an IPO (Initial Public Offering - where shares of the company are offered to the public for the first time) this year, which would mean a windfall for its shareholders, including the major labels.
Knowing the potential blowback from artists should they not see any money from the sale of the company they helped build, WMG decided to get on the right side of the situation instead of having to react to it after the fact.
Any resulting bad publicity from a Spotify IPO could harm the streaming side of the music business, which has grown into a major source of revenue for the industry as is quickly replacing physical sales.
As a result of this story, Sony Music announced that it would also give back a piece of the proceeds from any sale (no word on exactly how big a piece). The question now remains, will Universal Music feel compelled to follow?