Spotify has come out in defense of its attempt to scrap a pay rise for songwriters on its service in the United States – and has subsequently been accused of lying by a significant music industry stakeholder for the second time in a month.
The service is under fire from songwriters and their reps for legally appealing against a recent decision from the Copyright Royalty Board which would see streaming mechanical royalties grow by at least 44% in the States.
This rise was set to affect all on-demand streaming services in the US between 2018-2022, before Spotify and Amazon (plus Google and Pandora) filed an eleventh hour appeal against the ruling last week.
Today (March 11), Spotify publicly justified the attempted block.
In a new blog post, the firm says that it believes “songwriters deserve to be paid more”, but argues that there are “significant flaws” in the CRB’s new rate structure.
Although Spotify’s language on these “flaws” is, in parts, a little opaque, the firm does note: “We are supportive of US effective rates rising to 15% between now and 2022 provided they cover the right scope of publishing rights. But the CRB’s 15% rate doesn’t account for all these rights. For example, it doesn’t consider the cost of rights for videos and lyrics.”
That’s because the CRB-approved rate rise will only cover mechanical royalties on streaming services, not stretching to video or lyric content (which is negotiated separately in the US). Whether or not that’s the “right scope” of publishing rights, however, all depends on who you ask.
“We are supportive of US effective rates rising to 15% between now and 2022 provided they cover the right scope of publishing rights.”
Publishers might point out in response that, should audio/visual and lyrical rights be wrapped up into the 15%, the real amount of money coming out of Spotify to songwriters annually would be significantly lessened. (The 15% here refers to the CRB-approved percentage of Spotify’s annual revenues to be distributed in mechanical royalties.)
Spotify adds: “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. This will hurt consumers who will lose access to them. These bundles are key to attracting first-time music subscribers so we can keep growing the revenue pie for everyone.”
In addition, the company warns that growing payouts for songwriters and publishers – ostensibly, out of Spotify’s own pocket – “cannot come at the expense of continuing to grow the industry via streaming”.
The suggestion, there: we’re a loss-making entity, and can’t afford to be paying out extra money to rights-holders willy nilly.
The Spotify blog post adds: “The CRB judges set the new publishing rates by assuming that record labels would react by reducing their licensing rates, but their assumption is incorrect.”
“Wow. I didn’t think Spotify could sink much lower – but they have. This statement is one giant lie…They must think artists and songwriters are stupid. They are not.”
David Israelite, NMPA
David Israelite, CEO and President of the National Music Publishers Association, rubbished that suggestion when contacted by MBW.
He stated: “Wow. I didn’t think Spotify could sink much lower – but they have. This statement is one giant lie.
“I’m sure a PR team spent a great deal of time and energy crafting a statement to try to deceive artists and songwriters. They must think artists and songwriters are stupid. They are not.”
He added: “The CRB ordered a rate increase for songwriters. Spotify is against it. It really is that simple.”
Dina LaPolt, founder of LaPolt Law and lawyer to artists including Britney Spears and Steven Tyler, responded with similar bluntness, calling Spotify’s blog post “fake news” and “straight up lies”.
Speaking in a new podcast interview with MBW, Israelite says: “Songwriters are important business partners to Spotify, but they’re treated instead like indentured servants.
“It’s insulting, it’s something that I think the songwriter community is getting fed up with, and I think this may be the final straw that breaks the back of [that] relationship.”Music Business Worldwide