Nashville Town Hall Urges Songwriters to Abandon Spotify Over 'Harmful' CRB Rate Appeal

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Downtown Nashville, Tenn.

The NMPA/NSAI event was billed as a "fair and open discussion" but called out the streaming giant for pitting the industry against itself.

Cancel your Spotify subscription and switch to Apple Music -- that was Nashville Songwriters Association International (NSAI) executive director Bart Herbison's message Wednesday (April 10) at a town hall meeting for songwriters in Nashville sponsored by his organization and the National Music Publishers' Association (NMPA). The event was held at the 3rd & Lindsley Bar & Grill and also streamed live via Facebook and Twitter, urging those in attendance to tell their fans to abandon Spotify as well, in protest of the company's appeal to the Copyright Royalty Board's recent streaming rate increase for songwriters and publishers. 

Last January, the CRB determined that songwriters should get annual increases in the headline rate from 10.5% to 15.1% by year 2022. That determination was finalized in February this year, but then Spotify -- along with Google, Pandora and Amazon -- appealed that decision, leaving the future of songwriters' long-demanded pay raise uncertain. According to Herbison, Spotify and Amazon specifically were the ringleaders of the appeal. Meanwhile, he noted that Apple Music hadn't appealed the rate increase and said that songwriters are grateful for that.

"Spotify, in particular, is talking out of both sides of their mouth," Herbison said. "They are pretending to care about you but nothing could be further from the truth... You should be insulted by some of Spotify tactics. In their blog, they indicated that their action was somehow good for songwriters. Do you believe trying to quash the biggest pay raise in 110 years is good for you?"

Spotify has launched a campaign to convince the songwriter that they are their friend and yet "they want harmful changes in the way your royalties are set," he said. "They even want to revisit 100% licensing," he continued, referring to a decision in an appeal court that upheld Judge Louis Stanton's decision that the consent decree doesn’t disallow fractionalized licensing. "Would your friend say a writer from ASCAP can't write with a writer from other societies like BMI, SESAC and GMR?"

NMPA president and CEO David Israelite later said it was only the second time in 110 years that songwriters and publishers have gotten a meaningful raise in royalties. 

"To put it in context in the physical world with the CD, the split between record labels and artists versus songwriters and publishers was a 12-to-1 split, or for every $1 dollar songwriters and publishers got, labels and artists got $12. In the download world, without the controlled composition, that split was lower, 9-to-1; and as a result of the latest rate determination in streaming the split would have been 3.8-to-1," Israelite said. "That is the closest that the songwriters and publishers have come to parity with the labels and artists."

Even with that split, Israelite argued that songwriters should get more, with many in music publishing advocating for a 1-to-1 split. Israelite said the digital services are the partners of the publishers and songwriters and he was not "here to trash them and call them names." He said, "I want to stick to the substance of what they are doing."

But he said the appeal of the CRB rate "was an outrage." Then he tackled the Spotify blog post on the company's website and point-by-point proceeded to take the service's arguments apart, much as he has done elsewhere publicly.

Israelite noted that while Spotify says it is supportive of the 15 percent rate, "but what they are saying is provided [that rate] covers the right rights."

Israelite alleged that Spotify is saying that the 15% doesn’t consider the cost of licensing video and using lyrics. The compulsory licenses where the government sets the rate is for mechanical licensing. And then if a service wants to have video or lyrics on their sight they have to negotiate with publishers for a license and pay additional royalties.

"What [Spotify] is really telling you is that they want to cut the rate they pay and them jam in other rights all for 15 percent," Israelite charged.

Israelite then explained at length what Spotify meant by using the ruling on bundles as a reason why it appealed.

In its blog post, Spotify said: "The CRB rate structure is complex and there were significant flaws in how it was set. 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."

According to Israelite, the way the CRB formula works now is that if a Spotify subscription is bundled with a gym membership for $50 a month, if the Spotify subscription is worth $10 then the 15.1% rate would be applied to that and the songwriters and publishers would get $1.51. But according to Israelite, they want the formula changed so that the value of the other part of the bundle is subtracted first; and then whatever is left would have the 15.1% rate applied to it. So if the gym membership by itself cost $50 then that would be subtracted and the publishers would get 15.1% of the nothing left over. Effectively, Spotify is trying to change it so that songwriters and publishers could get zilch when bundling occurs.

"When you understand what they are trying to do, it is pretty offensive," Israelite said.

He also said Spotify is seeking to pit the industry against itself: While the labels and artists get to negotiate their rates with services like Spotify, publishers and songwriters aren't awarded the same privilege because their rates are set through a trial, he noted. Also, songwriters can't pull their songs from the website either, if they don't like the rates. 

After Israelite, songwriter and NSAI president of the board Steve Bogard told the crowd "nothing is more disheartening" than to seeming to win, only to then have services appeal. "Spotify presented they wanted a cooperative music business but they flat out lied," he said. "It's wrong, what they are doing."

He urged all songwriters to fight back in any way they can.

During the question and answer session, someone asked how long the appeal will take and Israelite said it could drag on for two years.

The payments under the new rates with an appeal hanging overhead creates a dilemma for publishers, he said. As it stands, the rate is retroactive back to 2018 and, while last year was paid under the old rates, going forward the new rates will be imposed during the appeal. But, Israelite wondered, what happens if songwriters and publishers lose and instead have the rates cut? Would it be better to payout songwriters during the appeal at the new higher rate and then be forced to recoup against any extra money they might wind up owing streaming services? Or should publishers hold the increased portion of payouts in escrow until a decision from the appeal is made? There's no winning. 

A video of the NMPA/NSAI town hall event can be viewed here.