Should Artists Get a Cut When Their Songs Land On Branded Playlists on Spotify?

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Spotify

The acts featured in advertorial content help boost a brand's visibility without permission.

Spotify’s RapCaviar playlist has more than 9 million followers, and for many young listeners it has taken the place of local hip-hop stations in discovering new artists. It has been called “the most influential playlist in music” by New York magazine and not surprisingly so; inclusion on the playlist has almost single-handedly changed the trajectory of several artists’ careers.

RapCaviar is one of a series of continually-updated playlists Spotify offers with varying themes; Get Turnt (3.6 million followers), mint (4.9 million followers) and Hot Country (4.5 million followers) are others. These playlists function almost as an editorial extension of the Spotify streaming service -- something that sets them apart from their competitors. And like all content for ad-supported businesses, playlists are an asset for Spotify to monetize.

As traditional advertising has become less engaging for consumers, publishers and brands have pivoted towards curated sponsored content as a way to break through their indifference. On its face, sponsored material mimics genuine content, but is usually somehow subsidized by a brand and calculated to promote the brand. This shift has allowed brands to supplement traditional advertising with more genuine coverage of their products. Publishers also benefited -- in an increasingly-competitive environment, they had more ad inventory that couldn’t be cut off by an ad-blocker. Given its inherently commercial message, sponsored content is subject to a different set of legal standards than typical editorial content. 

Spotify allows companies to sponsor its curated flagship playlists, or brand accounts can create “branded playlists” that evoke a brand's message. McDonald's, for example, has multiple public playlists that are represented by pictures of its food and have pun-ny names referring to McDonald’s slogans (e.g. “Lovin’ is in the Air”). Additionally, brands like State Farm, Adidas, BMW, Verizon and Nike have created playlists on their brand pages.

In a post from May 26, 2016 -- now deleted, but available via archive.org -- Spotify touted the launch of the sponsored playlist where listeners will be "immersed in your brand’s message, across audio, video and display." The blog post explained how brands might link a sponsored playlist to their own commercial message: "Cardio or Power Workout are perfect for a footwear brand expanding from lifestyle shoes to workout sneakers. A QSR adding breakfast to the menu? How about Morning Commute? An entertainment company with a summer blockbuster teeny-bopper flick? Teen Party, of course. You get the idea."

This alignment of content and brand message is a form of sponsored content. So while many of Spotify’s traditional advertisement offerings -- banner ads, in-stream breaks and full screen ads -- may appear sufficiently disconnected from the content to avoid any rights issues, these playlists may not be. When a brand curates its own playlist (or chooses one that evokes its offerings) it is using songs specifically to influence a consumer’s perception of the brand. If the artists on that playlist are a part of what is, truly, advertising, then shouldn't the brands ask for permission and fairly compensate artists?

In analogous situations with respect to other advertorial content, courts have often said that the answer is yes. Significantly, if a work is considered “native advertising,” its implicitly commercial message means that it can be stripped of First Amendment protection against claims of copyright and other infringement. In other words, using copyrighted or protected works to advertise a product requires the owner’s consent: fair use and free speech are typically not successful defenses.

“Commercial speech” can be overt, proposing a specific transaction -- but it can extend to speech of a more implicit nature, such as that which “seeks to influence how consumers view the company for the purpose of promoting sales of its products,” according to the American Bar Association. Although fair use can provide wide protection for editorial publications reproducing copyrighted works for commentary or reporting purposes, use for inherently commercial purposes -- a brand’s attempt to insert itself in pop culture at the expense of an artist’s copyrighted work -- almost certainly wouldn’t cut it. The logic behind this is simple -- that a brand should obtain consent and compensate an artist for aligning their protected work with the brand’s message.

Over the years of its existence, Spotify’s guidelines for branded playlists have changed: In 2013, the branded playlist page required lists to be “user-generated (due to label restrictions)” and “no less than 40 songs.” Now, Spotify’s “Brand Playlist” guidelines state “the more songs the better” and recommend that brands include more than 20 songs, with no artist more than once. Spotify’s actual Terms of Service are even more restrictive: Brands may not “create or share” any playlists that “imply an endorsement or relationship between the Brand and any artist or any other party.” The “false endorsement” that the guidelines refer to is one risk of a brand using another’s protected material without permission; for example, in 2015 Michael Jordan won an $8.9 million judgment against a grocery store that ran an ad evoking his likeness without permission. While suggesting that your brand is endorsed or condoned by any particular artist could be a risk for branded playlists, it isn’t the only issue.

Using an artist’s copyrighted material as part of any content without permission can constitute copyright infringement. The fact that the content is branded, and thus commercial speech, will likely preclude any fair use argument. Given the bifurcated nature of music copyright -- labels often own the master recordings, while songwriters and publishers own the music -- and the incorporation of an artist’s brand, this commercial use of a song would technically require a handful of permissions.

When asked about this practice, one representative of an artist whose music appears on a McDonald’s account playlist stated that they had not been informed or asked permission for the placement of the song, but did not want to be named out of fear of tarnishing their relationship with Spotify or possible brand partnerships in the future. Other representatives echoed this sentiment, including those whose artists showed up on BMW, McDonald's and Wendy’s playlists. One also pointed to the fact -- without naming any specific contractual provision -- that [he] operates under the assumption that, just as Spotify users have the ability to make playlists, brands could, too, without any further approval.

One major label executive tells Billboard that there is “some communication” between that platform -- in this case, Spotify -- and the artist, generally through the artist's label, about music being placed on a brand's playlist; for example, if an artist is an outspoken vegan, they could opt out of being included on a McDonald's playlist. "But for the most part, you want to be on those branded playlists because it's a good revenue opportunity around those songs," the executive explains, adding that occasionally, branded playlists on the ad-supported tier do compensate artists at a higher per-stream rate due to a premium ad buy, but that they more typically pay out at the standard per-stream rate. On the other side, "If a brand is going to buy out the ads, it's a big package deal. It's a premium ad experience; they control the presentation, it's a complete wrap around a playlist."

Presumably Spotify’s agreements with labels -- typically the owners of the recorded works -- cover and permit this kind of use; the executive declined to comment on the specifics of the deal. But it doesn’t change the underlying concern. Particularly, given streaming services' low per-stream royalty payouts, should artists be more fairly compensated for the overt commercialization of their work?

A Spotify spokesperson declined to comment on the practice, but publicly-facing Spotify branded content guidelines point only to implication of endorsement as a potential problem to avoid: “You’ll need to use your own discretion to avoid implying any endorsements.” The guidelines lay out several “rules of thumb” for brands to consider when making playlists, none of which include asking for permission for the use of each song. The guidelines urge brands to “keep your playlists editorial in nature,” but given what we know about commercial speech, can a brand ever editorialize in this way?

Spotify is not alone; iHeartRadio and Pandora engage in similar practices with respect to branded playlists on their ad-supported tiers. While streaming services may not be able to or have any desire to keep brands off of their services, Spotify’s guidelines and terms of service could be more strict to attempt to preclude this kind of encroachment. But this conundrum also perhaps highlights one of the reasons that Spotify will have to be creative to find more ways to monetize its service: Its most valuable assets are owned by others.