Spotify to Pay Rights Holders $500 million in 2013, Chief Exec Daniel Ek Says at Founders Forum Event

Spotify chief executive Daniel Ek on Tuesday said his company expects to pay rights holders to the tune of half-a-billion dollars in 2013.

Ek, speaking at a technology and media event hosted by the Founders Forum in Los Angeles, said the amount Spotify is projected to pay artists, labels, publishers and other rights holders this year -- $500 million -- is equivalent to the total amount that the company had paid out since it launched its on-demand music streaming service in 2008.

By comparison, Pandora Media paid $230.2 million to rights holders in the four quarters ending Oct. 31, the latest period for which it reported its financial performance, and VEVO paid out $200 million since it launched in 2009.

Universal Music Group president of global digital business Rob Wells, who spoke at the same event, acknowledged that Spotify is a “substantial” source of revenue for the record company, making it unlikely that Universal would sever ties with the service when their licensing contract comes up for renewal.

The symbiotic relationship between Universal and Spotify underlines a key theme for the two-day Founders Forum event -- how media and technology companies can work in tandem to forge new business models in a world where traditional distribution methods are eroding.

“It is a moment of unprecedented transition and transformation,” Jeffrey Katzenberg, chief executive of DreamWorks Animation, told a group of about 200 media, entertainment and financing executives who gathered at the SoHo House in West Hollywood.

Katzenberg, along with Universal Music Group CEO Lucian Grainge, William Morris Endeavor co-CEO Ari Emanuel, Sony Entertainment CEO Michael Lynton, and FX Network president John Landgraf all agreed -- making money from content is much more complex than it used to be, and entertainment companies have to go outside their traditional comfort zones.

From left to right: FX Network president John Landgraf, DreamWorks Animation cheif executive Jeffrey Katzenberg, Universal Music Group CEO Lucian Grainge and Sony Entertainment CEO Michael Lynton (Photo credit: Phil McCarten)

“I spend more time thinking about what happens to the IP after its theatrical release than I do before” it is released, Katzenberg said.

It’s not just toy franchises, but also release windows created by new online and mobile distribution channels.

“We’re going through a tectonic shift to mobile now,” Ek said. The good news is that there isn’t as much rampant piracy on mobile platforms as there is on the desktops, allowing the content business to hit the reset button on digital distribution models. “It’s kind of like we get to start all over again.”

Two key advantages to mobile platforms are their simplicity and their immediacy, allowing people to discover content and instantly gratify themselves.

“I want Shazam for everything,” veteran producer and industry executive Rick Rubin said of the convenience that mobile platforms can provide. “If I see a car I like, I want to Shazam it and have it just magically appear for me.”

While traditional media and entertainment companies are twisting themselves in pretzel knots figuring out the shifting landscape, media start-ups are experiencing a “Golden Age,” according to a panel of financing executives at the event.

“We have a perfect storm” of available capital, a deep talent pool that’s willing to take risks again and technologies that enable global reach, Idealab founder Bill Gross said. “There’s never been a better time to be a start-up.”

If Spotify, VEVO, Pandora and other entertainment technology companies continue to pour hundreds of millions of dollars back into the music industry, the environment for collaboration between start-ups and traditional content companies will only get better.