Beggars Group, one of the most successful independent record companies in the world, has opened up about the formula it used to pay its artists a portion of proceeds from the sale of its stake in Spotify last year.
As a founding member of indie commercial agency Merlin, Beggars – home to the likes of XL Recordings, Matador and Rough Trade – would have seen its stake-holding in Spotify sold on the day the company floated on the New York Stock Exchange in early April last year.
Merlin recently announced that its total stake in Spotify (and therefore the stake owned by its members) was worth over $130m when it offloaded its holdings in the company.
Beggars Group would have then received its market share of this figure within the Merlin membership.
Within Beggars Group’s latest annual accounts, filed this week on UK Companies House, the firm explains: “During the year we received the proceeds of the sale of our shares in Spotify. We believe that our artists should share equally in that windfall.”
The company then reveals that it “accounted 50% of those revenues to artists past and present” – but did so while also allocating this money against unpaid recoupment bills which artists may have still owed Beggars.
“Certain other companies apparently distributed these [Spotify] revenues based on the artist royalty rate, meaning they would have paid out a far lower percentage irrespective of recoupment.”
“After allowing for recoupment on advances, 44% [of the total Spotify proceeds were] paid out in cash,” says Beggars, adding: “Certain other companies apparently distributed these revenues based on the artist royalty rate, meaning they would have paid out a far lower percentage irrespective of recoupment.”
If we’re reading that right, Beggars appears to be pointing the finger at Sony Music.
Sony Music boss Rob Stringer surprised the global music industry last year when his company told artists it would not be allocating any distributed Spotify share sale money against unpaid recoupment bills.
The move was widely applauded by those in the artist community – especially those on Sony‘s own roster. Senior sources tell MBW that Sony’s Spotify policy would have seen it pay out a nine-figure sum to artists and distributed labels.
Beggars accounts also reveal the company’s financial performance in the 12 calendar months of 2018.
As you can see below, the firm – run by founder and Chairman Martin Mills – turned over £74.16m in the year, which according to average yearly exchange rates works out at approximately USD $100m.
After its joint venture partners were paid their share of this money, Beggars Group’s own net revenues worked out at £40.59m ($55m).
Its operating profit in FY2018 stood at £11.95m ($16m), while post-tax profit was £10.56m ($14m).
(Beggars’ total comprehensive income weighed in at £11.37m ($15m), largely thanks to currently gains on net investments abroad.)
Beggars Group ended 2018 with cash and cash equivalents of £28.7m ($39m).
Some £30.7m ($41m) of its turnover came from outside the UK, with £9.89m ($13m) being generated in its home territory.
Beggars, which runs a well-established operation out of New York, heralded the “enormous success” of its US-based business in its annual fiscal review, which you can read in full below:
“Beggars Group had another successful trading year, consolidating on the success of recent releases which continue to stream well. Most importantly we have been busy finding and developing an exciting roster of new artists and new music across our labels, many already at launch stage.
“As streaming and subscriber growth continues apace, our music too has enjoyed growth in line with the market. Our entire catalogue has been the beneficiary of this phenomenon, not just recent releases. We’re pleased to note the growth in streaming from developing markets and the enormous success of our US business. Revenues from our traditional European territories and Australasia remain strong and are a significant part of our success.
“As streaming and subscriber growth continues apace, our music too has enjoyed growth in line with the market. Our entire catalogue has been the beneficiary of this phenomenon, not just recent releases.”
“During the year we received the proceeds of the sale of our shares in Spotify. We believe that our artists should share equally in that windfall. So, we accounted 50% of those revenues to all our artists, past and present. After allowing for recoupment, 44% was paid out in cash. Certain other companies apparently distributed these revenues based on the artist royalty rate, meaning they would have paid out a far lower percentage irrespective of recoupment.
“The business continues to invest in IT infrastructure to deal with the complexity of formats, channels and territories. We take seriously our commitment to account transparently and accurately to our artists, without reliance on third parties. We have built our own data source platform and every month process over 1bn digital transactions… from 200 Digital Service Providers covering 241 countries, with a metadata matching rate of 99.9%.
“We are dependent on our ability to achieve success with new acts as much as our ability to continue to exploit globally our prestigious catalogue. To that end we are committed to treating artists fairly and have developed a number of industry-leading policies to reflect that. “Music Business Worldwide