Smoking Gun? Spotify “Accrued Fees To Copyright Holders” Now at 146 Million

Spotify Royalty Liabilities

As the unlicensed unpaid song fiasco with Victory Records indicated last week, and as I illustrated with my own catalogue in July,  Spotify and other streaming services have a serious problem with unpaid and unlicensed songs.

Estimates on the amount of unpaid royalties range from $50$150 million dollars.  A source just provided us with a copy of the 2014 financial statements for Spotify and this shows that Spotify lists under current liabilities $146 million in “Accrued Fees To Copyright Holders.”   A certain amount is expected, as any service accrues royalties to copyright owners but doesn’t pay them immediately.  However you would think this amount as a percentage of overall revenue would remain the same, right?   But as noted below this liability category increased from 8% of revenues in 2013 to 13% in 2015.   Or looked at another way Spotify’s growth was 144% but “Accrued Fees to Copyright Holders” increased 233%!     There are all sorts of reasons that this non-linear relationship between revenue and unpaid fees exists,including the fact our sample size is 2 and easily represents noise!  But it is certainly an intriguing fact.  And if there are tens of millions in songwriters royalties hiding in the balance sheet?  This is where they are hiding.   Spotify could of course clear this up.  Unfortunately as far as I can tell it is not broken out in the balance sheet nor is it listed as a contingency/contingent liability.

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