This sounds reasonable, doesn’t it? Achieving market freedom and fairness? The streaming giant complains that the guidelines Apple mandates – essentially as the platform selling Spotify’s product – are unfair and costly. Meanwhile, songwriters, who must rely fundamentally on Spotify to “sell” their songs face a directly analogous problem: Spotify has become the predominant “Song Store” and it has refused any measure of market fairness for songwriters since its inception.
Spotify has a leg up in curtailing creators’ market freedom because it can hide behind government-controlled prices in the form of a compulsory license. Songwriters don’t get to sell their work in a free market. Instead, every five years, Spotify and other digital streaming platforms go to court against publishers and songwriters to argue over the royalty rates they must pay for the next five years.
Copyright holders consistently push for rates consistent with the value musical works bring to the streaming giant, while Spotify and other platforms fight for lower and lower rates, claiming they already pay too much.
What’s most disappointing is that if Spotify saw songwriters as business partners, instead of adversaries, we could forego this entire process. Apple Music, notably, voluntarily bows out of this proceeding and does direct deals with publishers and songwriters at higher rates than the government’s mandated minimum.
The last time this process played out, back in 2018, Spotify was told by the Copyright Royalty Board (CRB) that it would have to start paying songwriters more. During the period of 2018 through 2022, digital services were instructed to raise what they pay creators for interactive – or on demand – streaming from 10.5% of revenue to around 15.1% of revenue – in what amounted to a 44% increase. While still not fair compensation, the increase represented a significant and overdue raise for working songwriters.
Once the CRB issued its final determination implementing the increase, Spotify and Amazon banded together to fight it. After years of battling in court to achieve this modest raise, publishers and songwriters were again forced to defend against Spotify’s and its accomplices’ appeal. Keep in mind, Spotify spent millions on this challenge – choosing to direct resources to fighting songwriters rather than paying them fairly.
Fast forward to this summer. The D.C. Circuit Court of Appeals ruled that much of the case would be remanded – or sent back – to the CRB for further review and explanation. This means publishers and songwriters are forced to continue to fight to uphold the modest raise we achieved in 2018. Until that process plays out, questions remain.
The biggest question, beyond rate determinations and the complicated formulas that will be debated, is why Spotify continues to fight this epic battle against creators. When you consider Spotify’s quest for marketplace fairness with Apple, it is incredibly ironic that it continues to hide behind its government-given compulsory license to avoid paying songwriters their fair market value. Apparently, according to Spotify, while “every app developer is entitled to fair market treatment,” songwriters are not.
One would have to question Spotify’s values as they stem from its business practices. Recently Spotify staff members reportedly protested the platform’s Joe Rogan podcast, threatening strikes due to the show’s content. One wonders whether the staff, all likely avid music fans, approve of Spotify’s backroom quest to undercut the creators on which it relies. This selective outrage is shocking considering the very real repercussions that Spotify’s legal challenges have on songwriters’ daily lives.
The hypocrisy doesn’t end there. Spotify continues to operate its “Secret Genius” program essentially as a backhanded compliment to our entire industry. The awards program claims to elevate writers – whose genius is anything but secret – while the company undermines them in court behind their backs. They attempt to get away with this because they know few creatives are aware of the arcane process that determines their royalty rates because they’re busy, you guessed it, creating. Spotify may give them awards every year during Grammy Week in Los Angeles, but here in Washington, they are fighting them year-round.
Technically speaking, Spotify provides a great platform for discovering music. However, for Spotify to fight Apple over what it perceives as restrictive policies that hurt its bottom line, while simultaneously taking advantage of a prejudicial court process to further reduce what it pays creators, is the worst kind of duplicity.
In the coming months, the CRB will determine, largely based on procedural questions, whether the raise previously given to songwriters will continue, even though this matter was resolved years ago. And next year publishers and songwriters will again begin fighting for well-earned higher rates for the next five-year period. It is conceivable that the debate over the 2018-2022 rates will still be happening as the 2023-2027 rates are being determined. You read that right. This mess is due to one company’s quest to forego fairness for songwriters while fighting for fairness for itself.
David Israelite is the president & CEO of the National Music Publishers' Association. The NMPA is the trade association representing American music publishers and their songwriting partners.