Spotify rejects royalty terms
Spotify, along with other large companies such as Google and Amazon, has recently come into controversy as the company announced its intention to appeal a songwriter royalty-rate increase.
The whole debacle began in January of 2018 when the US Copyright Royalty Board voted in favor of boosting the royalty rate that music streaming services, including Spotify, had to pay to songwriters. Before that decision was made, the royalty rate was 10.5 percent. With the boost, however, the Board proposed to raise that figure to 15.1 percent over a five-year period. Naturally, Google, Amazon, Spotify, and other large companies oppose this ruling, as it means they will have to dole out more money, cutting from their profits.
Nearly a year after the Board reached their decision, in March of 2019, Spotify, in unison with Google, Amazon, and Pandora, announced their intention to appeal the ruling.
Following the appeal announcement, Spotify released a blog post in the “News” section of their website, attempting to justify their action. According to this post, Spotify supports an increase in royalty rates but not under the Board’s terms. They wrote, “We are supportive of US effective rates rising to 15 percent between now and 2022 provided they cover the right scope of publishing rights. But the CRB’s 15 percent rate doesn’t account for all these rights.” The post goes on to state that the Board’s decision “doesn’t consider the cost of rights for videos and lyrics.” However, they did not further elaborate.
“The CRB rate structure,” Spotify said, “is complex and there were significant flaws in how it was set.” The only clarification the company gave was saying that the decision makes it very hard for music services to offer bundles of music, which, they stated, are “key to attracting first-time music subscribers.”
Spotify’s announcement to appeal the CRB’s ruling has seen them come under fire by major figures in the international music business. Nashville Songwriters Association International (NSAI) Executive Director, Bart Herbison, issued a joint statement with David Israelite of the National Music Publishers Association (NMPA), saying, “Spotify specifically continues to try and depress royalties to songwriters around the globe,” as well as, “No amount of insincere and hollow public relations gestures… can hide the fact that these big tech bullies do not respect or value the songwriters who make their business possible.”
Notably, Apple has expressed its intent not to appeal the Board’s ruling. As a result, many, including the above David Israelite, have praised them. However, Apple wins either way; either Spotify and its allies succeed in appealing the decision and Apple does not have to increase its royalty rates, or Spotify and its allies fail, and Apple has to increase its rates—but they remain in the public’s good graces with all the positive publicity they have received part in the appeal.