Spotify Explains Decision to Join Appeal of Royalty Board's Rate Determinations

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The Spotify logo displayed on a smartphone on Dec. 17, 2018.

Spotify has defended its recent decision to appeal royalty rates set by the Copyright Royalty Board, calling into question "significant flaws" in how they were determined. In a blog post targeting users of its Spotify for Artists service, the company sought to give music creators an overview of why the decision was made and to dispel any notion that it was "suing songwriters," as some headlines suggested.

"Does Spotify think songwriters deserve to be paid more?" the post asks. "Yes -- this is important to songwriters and it's important to Spotify. 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."

On March 7, Spotify, along with Google, Pandora and Amazon, took the unprecedented step to file notices of appeal to the CRB's rate determinations, finalized in January, boosting digital services' payments to songwriters and publishers by 44 percent over a four-year term. The new mechanical statutory rates cover 2018 to 2022 and include a headline rate increase from 10.5 percent of revenue to 15.1 percent of revenue.

In its blog post, Spotify said it is generally supportive of a 15 percent rate, provided the rates cover what its calls the "right scope of publishing rights," including those for videos and lyrics. Spotify argues that the CRB's decision limits the type of non-music offerings it can present to potential subscribers.

"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," the company said. "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."

Spotify also cautioned that attempts by DSPs, artists, writers and other rights holders to increase their share should not come at the expense of growth throughout the music business, which has been driven by streaming.

"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," the post said. "However, we are willing to support an increase in songwriter royalties provided the license encompasses the right scope of publishing rights."

Spotify closes its blog post vowing to "listen and be open about what we think. Our mission is clear: we want to help more artists and songwriters make a living doing what they love."


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