Over the years, Spotify has addressed the latter two issues by positioning its business model as a bulwark against piracy. (It's easy to point to the success of Netflix as a good example of this theory.) The theme has been core to CEO Daniel Ek's messaging as the company has grown, encountered criticism and defended its "freemium" business model. The company also employs a data-driven approach to shaping public opinion. A 2013 report by Spotify director of economics Will Page details Spotify's role in the decline in piracy in the Netherlands, concluding with a call for "effective public policy to improve the climate for copyright online."
But Spotify is a relative newcomer when it comes to public policy and music licensing. Because it negotiates directly with labels, Spotify has not spent years Pandora has spent fighting with labels over the statutory royalty rates and fending off vociferous criticism within the industry for 2012's Internet Radio Fairness Act, legislation favorable to Pandora that aimed to change how statutory rates are established. Pandora founder Tim Westergren has been the face of the company, testifying before Congressional hearings and making appeals on Capital Hill for a more favorable licensing structure.
Along with Pandora, Spotify has been a frequent target of criticism by songwriters regarding royalties, as seen on Bill Maher's interview with musician and songwriter Aloe Blacc on last week's episode of the HBO show Real Time with Bill Maher. Public policy can come into play here. If publishers are able to withdraw performance rights from ASCAP and BMI, a large digital service could end up paying tens of millions of dollars more to publishers.
Spotify's desire to prevent this rights withdrawal is apparent in the comments the company submitted last year to the Copyright Office's licensing study. The company said it is wary of publishers' calls for "parity" with label royalties. It believes the current system of consent decrees for ASCAP and BMI is "working well," is "largely effective and efficient," and would oppose any legislation that would undermine collective licensing of performance rights. Whether or not music publishers can partially withdraw from the two PROs, in order to negotiate directly with digital music services, will be determined later this year when the Department of Justice concludes its review of its consent decrees with ASCAP and BMI.
Prince says his team is tasked with raising attention on issues, trying to build support and coalitions, interacting with interested members of Congress and the executive branch, and gaining voter and consumer interest. "The straightforward way [to impact public policy] is to offer expert advice and offer opinions and shine lights on practices that aren't good for consumer," he says.
Many other music companies employ, either internally or externally, experts to further their public policy goals. Pandora has been active in the nation's capital. Last year the Internet radio giant hired two government relations employees and increased its lobbying expenditures to $500,000 from $300,000, according to OpenSecrets.org. The company also made 2 key hires last year: Dave Grimaldi, a former chief of staff to FCC commissioner Mignon Clyburn, as its Washington D.C.-based director of public affairs; and Katie Peters, a former legislative assistant, as director of government relations.
These hires are nothing out of the ordinary. Record labels, music publishers and their trade groups also work to influence public policy. Universal Music Group and Sony Music both employ government relations people in Washington D.C. Industry trade groups routinely use outside firms to supplement the government relations employees they have on staff.
Regulations on U.S. lobbying transparency help show value companies place on public policy. Last year, trade groups representing the music business spent between $770,000 (NMPA) and $4.1 million (RIAA) on lobbying. Vivendi, parent company of Universal Music Group, spent $2.9 million. Warner Music Group spent $1.2 million. ASCAP spent $870,000 across 3 firms. BMI spent $495,000 across 2 firms. SESAC spent just $80,000 last year. Live Nation spent $200,000.
Both sides of an issue can be heard in Washington D.C. The National Association of Broadcasters spent $18.4 million and iHeartMedia spent $4.5 million so lobbying firms could present their opinions lawmakers and regulators.