Beatport freezes payments to labels, throwing indies into disarray

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Beatport has written to labels telling them it won’t be paying owed royalties for the past quarter until its parent, SFX Entertainment, completes its ‘going private’ process.

In a letter to music rights-holders sent last night and obtained by MBW, Beatport told labels that SFX’s ‘going private’ procedure had “trapped certain earned label payments”.

Beatport, which recently struck an exclusive content partnership with Spotify, believes the process will be “coming to an end in the next few weeks, at which time all payments will be able to be made”.

The big problem for the small labels we’ve spoken to is one of cash flow: this blocked payment covers three months of income, from April-June, and was due to be paid last Thursday (July 30).

With Beatport accounting for 90% of digital income for some dance labels, such a delay in a primary revenue source risks badly damaging their stability.

Beatportpayments

The owner of SFX, Robert Sillerman, aims to take the company off the US stock market this year by purchasing the shares he doesn’t currently own in the ‘EDM’ specialist.

Sillerman is believed to currently own around 37.4% of SFX.

SFX has now completed a “go shop” period, in which the company was permitted to solicit acquisition proposals from alternative purchasers. That appears to have led the way for Sillerman to complete his buyback in the next few weeks, which will cost him $774m.

However, some now question whether Sillerman is able to raise the funds needed to purchase the remaining shares in SFX. If he can’t, then an asset sale – which may or may not involve Beatport, bought by SFX for $50m in 2013 – would be a possible option to bring down the pricetag of the business.

 Music Business Worldwide

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  • general_zubon

    If the streaming of original tracks is free to listeners, what is that 5% cut based off of? I know there’s a pool that streaming royalty payments are coming from, but it seems odd for Beatport to set a ‘pro rata’ streaming pay-out and then say, “oh, and 5% of that.” Would love some elucidation on this.

    • Will Johnston

      its 5% of advertising revenue for the free listeners, and 5% of subscriber revenue from the paid listeners.

      • Julz Winfield

        What 5%? It’s actually 0% on everything!! And thats based off of the payments that no one received July 30th! (AND STILL I’M WAITING FOR SOME TYPE OF WORD … TICK TOCK) They sure had $$ to develope another shitty streaming service that includes some lame ass stream player but BEATPORT a private company and buy shares back so he can become the owner right? Well how do you get a better price on those shares? Pull stunts like this so that the value of those shares drops and no one wants them! Then to top it off he is using money owed to us to pay for it? How is this even legal? SMH #SCAMPORT #WEAKPORT

      • general_zubon

        Thanks, Will. I was not aware Beatport was going to either inject advertising into the streams or have a paid tier for streaming. Has there been an announcement of these plans?

        • Will Johnston

          sorry should have clarified. BP just signed a major deal with Spotify, so its not happening yet but since this is the Spotify business model its the likely route once launched. 5% doesnt really sound equitable to me… We run a dance music tv channel in holland and pay around 14% of gross for music usage.

          • general_zubon

            I’m not sure about this. Reports are that the Spotify deal involved content sharing (and expanding Beatport’s brand), not a financial alliance. Beatport streaming currently exists as a free model. It’s my understanding there’s a ‘pool’ of cash that SFX is using for streaming payments for (I believe) the first three years in order to establish the service and keep it free. My confusion is that, in that case, a 5% payment on a ‘pro rata’ share seems to imply that 95% of that pool money is paid back to SFX, which makes no sense. Also, I do know Beatport really want their players to be be seen as an embeddable alternative to SoundCloud site embeds … adding advertisements to embedded streams or creating two tiered access would seem to defeat that purpose. There’s already an advertisement on their embedded players anyway … for Beatport. That’s the aim as I understand it.

            Regardless, anything is possible in the wild west. Wait and see.

          • Will Johnston

            you may be right, i was assuming, and you know how that goes :p

  • Robert Kessler

    The whole EDM industry is a freaking ripoff in case you hadn’t noticed. DJ’s all over the world play recordings of other people’s music and GET PAID FOR IT. That should be fooking ILLEGAL.

    • Sina Mailer Daemon Djavadkhani

      But the creator gets paid too no ?

    • Justin

      Aren’t you a little bitter; and for what? lol

      • Rob Tek

        yet im sure he plays other peoples music 😉

    • Ailsa Nordstrom

      You know, there are totally original EDM tracks out there, too. It doesn’t ALL have samples from other artists.

    • Scott Mayfield

      in my entire time in the business, I have never used a sample. Some of us are actually composers and arrangers, and fully resent this line of thinking.

  • Jack Daniels

    Robert Sillerman, the man pictured, and Beatport CEO Greg Consiglio are running a f***ing circus. They are buying companies and attempting to turn a profit, but they just keep failing and people lose jobs because of it. Greg has such a bad temper too. He is like a child and Robert keeps funding him when he fails. Such a circus.

  • Victorianight12

    This sounds unreal 5% compensation? for everything? and 10% for some rebooted mix beat? I don’t think so. Sounds like a complete rip off, I’d try my look with you tube thank you very much. How much is Spotify dolling out to record labels and artist? This is the reason so many artist are desperate to tour, it’s the only way to make any real money, and then ignorant trolls have the audacity to accuse artist of being sell outs, and corporate manufactured puppets, for leasing out their music to commercial ads, entering into merchandising agreements, taking on acting roles. In today’s climate where music is being leaked onto online sites like You Tube, torrents, and blog/vlog post it’s a headache to pull in any real revenue. Especially when the record label are eating into every aspect of a artist potential earnings, on top of half of their money being cut in half through taxes.

  • John Fitzgerald

    I’m not at all surprised its beatport. Get rich off other peoples music.