Spotify is facing harsh criticism and lawsuits in the US for reducing payments to songwriters. At the heart of the conflict is the streaming service's new audiobook service. TONO explains how it's connected.
/ 05/06/2024 / Kristian Dugstad– A complete betrayal.
That is the clear message to Spotify from the head of the American music publishing association NMPA, David Israelite.
The Swedish streaming service is in tough times after they announced that they will include an audiobook service in their Premium subscription - and at the same time reduce payments to songwriters.
Critics believe this is exploiting a loophole in American copyright law.
Conflicts between songwriters and streaming services are nothing new. American legal proceedings have been ongoing for a number of years.
In the US, the Copyright Royalty Board (CRB) is the body that determines the prices and terms that streaming services must comply with. In 2018, they decided that the level of songwriter payments should be raised.
Spotify vigorously opposed the case, but in 2022 the appeal was finally rejected.
The settlement ensures that by 2027, songwriters and music publishers will receive a minimum payment of 15,35 percent of any music streaming service's US revenue.
In the final agreement, which has been named "Phonorecords IV", the CRB has provided a number of guidelines, in addition to the percentages for rights payments. It is one of these that is now the starting point of the controversy.
A streaming service has the right to lower the payment below the set percentage if they offer package subscriptions consisting of several different services for one total price.
The idea is that it would be unfair if the rights holders on the music side were to receive the same percentage if the customer pays a higher price to access non-music-related content.
In April, Spotify announced that its Premium subscription now falls under this very provision, because it includes an audiobook service.
The announcement has led to a hailstorm of criticism, with many believing that calling the Premium subscription a "bundle" is a rip-off.
The "Bundle" provision in Phonorecords IV is understood by most as an opportunity to offer two separate and unique subscription services in one package, to recruit new customers and increase the number of subscribers.
However, Spotify's audiobook service does not exist as a separate product in practice. Critics therefore believe that this is a move by the billion-dollar company to reduce songwriter payments. This is the same turn in which they have also increased prices.
The head of NMPA, David Isrealite, has both written chronicle and spoke out to the online newspaper Music Business Worldwide about the matter.
– Spotify's attempt to radically reduce songwriter payments by redefining its music service into an audiobook bundle is a cynical, and potentially illegal, move.
Whether the move is legal, we may eventually get a definitive answer. Spotify's use of bundle-the clause has resulted in a lawsuit from the organization The MLC. The case is featured in Music Business Worldwide.
The Mechanical Licensing Collective is a non-profit appointed by the US government to ensure that songwriters without music publishers receive mechanical revenue from streaming services.
“Premium is exactly the same product as it was before the launch of the audiobook feature. Nothing changed the day Audiobook Access was launched. Premium subscribers still have access to the same single product, with the same on-demand access to millions of musical works,” the organization argues in its lawsuit.
Although this is currently a situation unfolding in the US market, TONO is concerned.
It is not unusual for developments on the other side of the Atlantic to have consequences here at home.
– TONO has long stated that Spotify and other streaming services must increase both subscription prices and payments to songwriters. Now that prices have increased, payments must also increase, says Kristin Haugan, who heads the media department at TONO.
She emphasizes that TONO, through Polaris Hub, always works for the best possible payment to songwriters, and will always oppose attempts to worsen our members' conditions.
“We support product development, but not at the expense of fair payment. We do not applaud any changes that result in lower payments to the people who create the very raw material that Spotify’s business is built on – Music. Without music – no Spotify, and no music without the songwriters,” she concludes.