Each service has made their own unique deals with labels and publishers for compensation. Some pay a fee per play or download. Others share a portion of ad revenue received; and rumors have a new MySpace music service trying to compensate labels with stock options.More concerning than what the artist deals don't say is what the deals do say. Every single record deal I've ever seen has a convenient little clause, providing that regardless of how the rest of the contract could be interpreted, if the label earns money that is not specifically attributable to the artist's masters, the artist has no right to that income. Therefore, if the label licenses it's entire catalogue, or if the label agrees to get paid a flat fee or royalty payment for any and all use of the recordings it controls, then the individual artists get nothing.
But how much of that money will find its way to the artist and how many of these new deals conform with existing label and publishing contracts or the statutory rate legally due songwriters? I don't know of a single artist contract that mentions stock options or ad revenue as acceptable compensation.
This is usually one seemingly innocuous sentence in what are often 40-page contracts, though the impact could be millions of dollars. To the extent that ad-supported and other unconventional distribution methods become more prevalent, labels will profit and the artists will get nothing.
This is not a case of a new distribution method not accounted for in the old-school record deals - they have always been fairly good about describing future types of sales that aren't currently known. For instance, downloads were easy and, in fact, under a lot of older deals the artists get a huge benefit - a service offering downloads has only licensed that right from the label, and artists typically get paid 50% on a license, so some are getting nice checks from iTunes sales. This loophole has been closed and almost every label now defines downloads as a traditional sale and thus, payable at the standard record royalty. Nonetheless, a sale is a sale, and artists are getting paid.
However, there is no similar provision for ad-supported revenue. Sure, they might (and should) be considered licenses and, thus, compensable pursuant to the general license provision in the record deal. The problem is the meddling "specifically attributable" language - unless imeem provides a detailed accounting of every recording that it transmits, the artists are out of luck. Moreover, depending on the language of the record deal, even if the labels get a detailed accounting of uses, the artists may still not get paid because the label gets paid on the whole. If the dollars aren't tied to the transmission, the artist may get nothing.
Fixing this is up to the artist's attorney; this is a provision that I've focused on for a couple of years, with varying degrees of success. However, as ad-supported services become more prevalent, artists must be all the more persistent in fighting for their right to be paid on these uses.