What’s going on with Spotify and streaming payments?

Musicians are paid fractions of a penny every time their song is streamed.

The U.S. Copyright Royalty Board (CRB) ruled last year that this is garbage and ordered that musicians’ share of streaming royalties should be increased from 10.5% of revenues to 15.1% over the next five years.

For the past year, the issue has been simmering in the background, probably ignored by or of little interest to the average music fan.

That might have changed in the past week, when several streaming giants made noises about suing for the increased fees to be thrown out.

Sirius XM Holdings, Spotify, Amazon and Google filed an appeal last week, saying the new arrangement “raises serious procedural and substantive concerns” and, if the new payment stands, “the CRB’s decision harms both music licensees and copyright owners,” Bloomberg reported.  

The appeal was filed on the last possible day of a review period after the CRB published the 44% rate increase for mechanical royalties, the kind associated with streaming.

In a joint statement, the National Music Publishers’ Association and the Nashville Songwriters Association International “fought hard to increase songwriter royalties by 44%+,” adding that any move from digital music services to oppose, delay or decrease the rate bump would “in effect declare war on songwriters.”

Strong words, indeed, and prophetic ones.

NMPA’s President and CEO David Israelite said “When the Music Modernization Act became law, there was hope it signaled a new day of improved relations between digital music services and songwriters. That hope was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one-third.”

Apple, by the way, is staying out of all of this mess, which is likely a very smart decision.

Israelite puts the blame on Spotify and Amazon, instead of Google and Pandora, for the battle to pay musicians more.

“Spotify and Amazon are the bad actors; they drove the decision to appeal the (ruling)… It’s fairly clear to use that (Google and Pandora) didn’t want to appeal, and are only doing so to protect their interests because Spotify and Amazon (objected). So they get a pass,” Israelite said in a podcast with Music Business Worldwide.

But Spotify contests that assertion.

“No, Spotify is not suing songwriters,” the company says in a statement released Monday. “Spotify, Amazon, Google and Pandora have each individually appealed the CRB outcome. The National Music Publishers’ Association, or NMPA, also filed an appeal. An appeal is the only avenue for anyone to clarify the elements of the CRB ruling.”

The streaming behemoth says it agrees that songwriters deserve to be paid more and says it’s “important” to Spotify that that happens. “The industry needs to continue evolving to ensure that the people who create the music we all love – artists and songwriters – can earn a living. The question is how best to achieve that goal.”

It seems that the company’s biggest complaint – and the reason for the CRB appeal – is whether the royalty increase includes publishing rights, which cover videos and lyrics. The current CRB structure does not account for those in the 15% fee.

“A key area of focus in our appeal will be the fact that the CRB’s decision makes it very difficult for music services to offer ‘bundles’ of music and non-music offerings,” Spotify continues. “This will hurt customers who will lose access to them.”

The way the CRB is currently structured would hurt emerging musicians, Spotify concludes, by setting a publish rate and “assuming that record labels would react by reducing their licensing rates, but their assumption is incorrect.”

Israelite, unimpressed, told Variety that he “didn’t think Spotify could sink much lower — but they have. This statement is one giant lie.”

Amber Healy

I write about music policy and lawsuits because they're endlessly fascinating.

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