Who Do You Suppose Is Buying Up Musicians' Catalogs Like HotCakes?

LATimes |  The exit of Young and Mitchell was enough to get Spotify Chief Executive Daniel Ek to release a lengthy statement on Spotify’s “critical role to play in supporting creator expression while balancing it with the safety of our users.” He didn’t mention Rogan by name. 

There’s a reason Billboard put Ek at No. 4 on its music business Power List for 2022. The Stockholm company counts 381 million users, including 172 million paying subscribers, in 184 countries, and in 2020 paid out $5 billion in music royalties, accounting for roughly 20% of recorded music revenues that year.

Cutting off that profit pipeline would be a big deal for artists and their labels. Young said leaving Spotify would cost him 60% of his streaming earnings.

Although artists these days make most of their money touring, royalty checks from Spotify are not easy to part with. Billboard estimated that Young and Mitchell are forsaking 10% of their annual earnings to bail on Spotify.

“Streaming income, while by no means the whole income picture, is the key income source now, and it’s driving the sky-high valuations that are allowing some artists to sell off and then sail off into the sunset with a yacht-load of cash,” said Bill Hochberg, a music industry lawyer in Los Angeles.

Spotify’s power extends beyond the balance sheet. The company, through its curated playlists such as RapCaviar, functions as the equivalent of a Tower Records in its heyday, combined with the biggest radio station conglomerates. Getting onto a popular Spotify playlist is a supercharged version of getting onto a record store end cap in the 1990s, exposing new artists to millions of listeners.

The company’s status as a promotional tool is as important as its function as a moneymaker through actual listening, and that helps touring bands develop the fan bases that buy concert tickets.

Music rights are complicated

Even when artists want to leave Spotify — and some do — it isn’t as simple as pressing the skip button. The top musicians typically don’t have direct relationships with streaming services; their music appears on the app through licensing deals with their labels and publishers.

The big labels — Universal Music, Sony Music and Warner Music — all have licensing deals with Spotify, as do the indies through music rights agency Merlin. Artists such as Mitchell have to go through their labels to get their tunes off the platform.

Many artists don’t even own their catalogs, creating additional difficulties. Top-tier songwriters such as Bob Dylan and Bruce Springsteen have sold their songs and recordings for nine-figure payouts. It’s unlikely the owners of those catalogs would want to forgo Spotify’s streaming revenue after forking over so much money in the hopes that streaming would make their investments pay off.