by ButterflyEffect

Important parts:

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.

Of course, the biggest question is how much Sony Music gets paid per stream, and well, it’s complicated. Section 10 shows how Sony Music separated its label fees into three distinct tiers — the ad-supported free tier, online day passes (which no longer exist), and Spotify’s premium service. In each of those segments, Sony Music can pull in a revenue share fee that is equal to 60 percent of Spotify’s monthly gross revenue multiplied by Sony Music’s percentage of overall streams. (So if Spotify earned $100 million in gross revenue, the labels would would get $60 million. If Sony Music made up 20 percent of the streams, it would take home $12 million.)

In addition to the advance Spotify must pay Sony Music, it is also required to give the music label free ad space on its service. The "credit for advertising inventory" clause mentioned in section 14(a) grants Sony Music a total of $9 million in ad space ($2.5 million in the first year, and $3 million and $3.5 million in the subsequent years). And the free ads don’t come at market rates either — they must be given to Sony Music at a heavily discounted rate.

In the wake of Swift’s departure from Spotify, many musicians rallied to her cause, vilifying streaming services that paid a fraction of a penny per play. But this contract makes it clear — the pay per stream rates aren’t the only issue. According to its financial disclosures, the majority of Spotify’s revenue, around 80 percent, has been flowing out the door to the rights holders. "You can’t squeeze blood from a stone," said David Pakman, the former CEO of eMusic and partner at Venrock. "Your beef can’t be with Spotify anymore." At least not with Spotify alone.