How Taylor Swift’s ‘Spotify clause’ is helping artists get paid

[0:02] welcome back to search today's top searches are only part of the story a simple scroll can sometimes [0:07] take you down a deep rabbit hole it's time now for the spiral all right you guys are asking a [0:18] lot of questions about spotify there's a couple headlines buzzing about that and we're following [0:22] your clicks and curiosity and what it looks like is you guys want to know about a big stake sale [0:26] for universal music group and how taylor swift's so-called spotify clause is helping artists get [0:32] paid so let's break it down we've got kelly carter up first then we'll chat with brian [0:36] west guys thank you so much for joining us let's start with umg set to sell 50 of its spotify stake [0:42] they're expected to get more than 1 billion dollars in revenue for that kelly carter joins me now she's [0:47] our source for all things entertainment kelly what's going on people want to know why is umg [0:52] selling its spotify stake right now yeah you know it really comes down to timing i mean spotify is [0:59] doing incredibly well their stock is strong and umg is basically saying this is the moment to cash in [1:06] you know they're going to turn that stake into over a billion dollars like you said and they can use [1:10] that elsewhere this also and this is important it's going to boost the the share prices amid what [1:16] was kind of like a flat first quarter report even though they really wanted to let everyone know [1:21] that both the olivias dean and rodrigo did pretty well and so did justin bieber in the aftermath of that [1:27] anticipated coachella set now kelly would this sale actually affect spotify at all not really i mean it [1:34] doesn't change how spotify is going to operate day to day it's more like a behind the scenes and who [1:39] owns what you know if anything but like for listeners um it's not going to change but what i [1:45] will say as you reference is that years ago as part of her negotiation process to sign with umg [1:51] taylor swift demanded that the company pay out artists regardless of debts that they may have to [1:56] the company if umg ever sold off its spotify stock which means that there are going to be some artists [2:01] that are probably going to get millions of dollars because of this sale yeah kelly let's get to that [2:05] taylor clause in just a minute but you're talking about who owns what who actually is trying to buy [2:10] universal and how could it uh impact the spotify stake sale yeah you know billionaire investor bill [2:16] ekman and his hedge fund um which is persian uh square capital management they want to acquire umg with [2:24] a proposed offer valuing umg at roughly 64 to 65 billion dollars and umg is always going to attract [2:33] a lot of interest because it's one of the biggest players in music and bill and his guys they they want [2:39] it now kelly is it unusual for a record label to have a stake in a company like spotify or this uh [2:45] were the record labels betting on streamers really early they were they were betting on streamers incredibly [2:50] early because it's not unusual especially like in those early days of streaming like you said you [2:55] know labels really they took um stock and they took stakes and companies like spotify as a way to kind [3:01] of hedge their bet on you know as the industry was shifting not kind of knowing what it was going to be [3:06] and what streaming was going to do and how it's going to affect them but going forward we're probably [3:09] going to see like less of that because streaming it's not a gamble anymore it's just the standard it's how [3:15] i listen to music pretty much exclusively yeah kelly you had brought up that taylor swift clause much [3:20] earlier when that was first signed it felt like a footnote on a contract did you think it would [3:26] be playing out uh i guess this soon i i did not but apparently taylor swift did and i think that [3:32] there are going to be a lot of people that will be thanking her in the weeks to come you know once [3:37] once the sale of the stock goes through kelly thank you so much let's bring in brian west who has a lot [3:42] of people's dream job he's going to talk about taylor swift he's the taylor swift reporter for the usa [3:46] today network and we're talking about that spotify clause for taylor and what it means for how [3:51] artists profit from music streams you say this is one of the most consequential clauses brian taylor [3:56] has ever negotiated what actually is it so taylor has always fought for artists rights and so in [4:03] 2018 when she went to universal music group she left big machine that's when her entire catalog was sold [4:10] she had said that she wanted to have complete control over her albums and she also wanted this [4:15] spotify clause so what this basically means is when you are a new artist and you sign with a label [4:21] they pay up front advances recording budgets and other expenses like marketing artists then have [4:28] to pay that money back that's a recoupable cost so what she said in her closet every single artist with [4:34] umg they would not have to fall under this and so basically from streaming if you had a standard [4:42] contract that money that you got through streaming would go straight to the label and now it's going to [4:48] go to artists while they still continue to pay back that debt brian it's almost like taylor has a [4:52] crystal ball when talking about some of these issues how did she actually get this done especially [4:56] way back in 2018 this was uh eight years ago now well she's the most globally streamed artist of all [5:03] time they just announced that earlier she was also two years in a row the most amount of streams so [5:07] when you have that type of power you can ask for pretty much anything she already had a proven standpoint [5:12] within the music industry a lot of fans call her the industry and so when she went to universal music [5:16] music group she was like if you want me to be one of your artists these are some of the conditions [5:21] that i come with wow brian is the clause already in effect or does the sale have to go through [5:27] so it was a part of her contract so right now what we're seeing is that this will be true for all [5:32] artists for umg yeah brian what does this actually mean for swift and other universal artists moving [5:37] forward so i think what this means at least for the umg artists is that they are going to get paid for [5:44] their streams that money won't go back directly to the label like with other contracts what will be [5:48] interesting is if other labels maybe follow suit or how this is going to affect the market in general [5:54] yeah brian you described how uh advances and recoups actually work in the industry what actually are [5:59] they and how what are the other roadblocks that are stopping artists from making money off streams right [6:04] now so again it's basically when you sign for one of these contracts and you're a part of the label then [6:11] all that money for maybe your album for marketing even in some cases for promo the artist does have [6:16] to pay back those advances so in this case that might come from streams if you get any money from [6:22] your streams until your debt is settled that would go to the label so in this case it's again going to [6:27] the artist yeah brian you know taylor swift just as just about as well as anybody her acumen for for [6:34] being able to forecast some of these clauses and these decisions i mean it's unlike any other artist [6:38] we've seen in this generation just sort of how is her mind working this way when it comes to these [6:43] contracts and how is she sort of able to foresee where the industry is going from your understanding [6:49] so when it comes to taylor swift she is always fighting for artist rights we saw even with spotify [6:54] in 2014 she completely took her catalog off of the site because of low payouts she returned all of her [7:01] music back in 2017 once that was negotiated when she finally was able to buy back her masters her entire [7:08] catalog from her first six albums she wrote in a letter that she posted to her site saying she's [7:13] always fought for artist rights to make sure that they're fairly compensated and that it really and [7:19] it makes her happy when she hears from new artists that say like hey i've negotiated my contract because [7:25] of you because you were one of the first ones you inspired me to you know fight for my music fight for [7:30] my catalog it really does feel so consequential brian west thank you so much for your time