• Starbucks is going to be turning its baristas into Spotify DJs. Yesterday, the two companies announced a partnership that will take place in more than 7,000 locations of the coffee franchise. According to Forbes:
Starbucks employees will receive a Spotify Premium subscription. They can use it to help generate Spotify playlists culled from 20 years of Starbucks’ music picks. These will also be accessible via the Starbucks Mobile App. Under a reciprocal loyalty point arrangement, Spotify users will be able to receive “Stars as Currency” for My Starbucks Reward (MSR) Points.
But where will Taylor Swift get her double-whipped, triple-shot, frozen, swirled mochaccinos now that Starbucks has joined forces with her mortal enemy?!
Swift's coffee concerns aside, what's most interesting about this joint venture is that Starbucks has been a longtime proponent and partner of Apple, who is rumored to have a new music streaming service launching next month. The fact that Starbucks has switched alliances? Well. It's some next level Game of Thrones-type shit.
• That's not all we've got in Spotify news today. You might recall that Sony Music has been pulling its catalogue from sites like SoundCloud because it doesn't feel the relationship is lucrative enough (i.e., they wanted SoundCloud to run ads and give them more dollars.) However, the Verge recently leaked a contract between Sony Music and (you guessed it) Spotify that might call the label's distribution of streaming funds into question. The Verge stated:
In section 4(a), Spotify agrees to pay a $25 million advance for the two years of the contract: $9 million the first year and $16 million the second, with a $17.5 million advance for the optional third year to Sony Music. The contract stipulates that the advance must be paid in installments every three months, but Spotify can recoup this money if it earns over that amount in the corresponding contract year. But what the contract doesn’t stipulate is what Sony Music can and will do with the advance money.
It also appears that Sony has something called the "Most Favored Nation clause" written into its contract, which, in layman's terms, means that the company has the right to renegotiate the terms of its contract if it was to discover (through the use of an auditor) that another record label had negotiated a better deal with Spotify. On top of this, Sony Music was given a credit of up to $9 million worth of ad space on Spotify. But wait, that's not all!
Where the MFN clause truly comes in handy for Sony Music is when it’s used in conjunction with section 5, the "annual true-up of advances" clause. This clause makes sure Sony Music’s yearly advances from Spotify are on par with the best deal negotiated by any other label based on the percentage of market share. That means if another music label is getting paid $1 million by Spotify for each percentage of market share it has, and Sony Music is getting $600,000 per market share percentage, Spotify must pay Sony Music the $400,000 difference — known as the adjusted contract period advance — at the end of each contract year.
In short, what does this mean? Well, Sony made it rain with Spotify money. However, it's unclear how much, if any, of these advances are going to artists. While there's a whole lot of legal mumbo jumbo breakdown related to the amount Sony Music makes off streaming, and how much of this money subsequently goes to artists, there is no system of checks and balances for advances totaling in the millions of dollars' worth.