Wednesday 13 March 2019

Songwriters and music publishers furious with Spotify over US rate appeal

US publishers and songwriters have hit out at an appeal made by the US streaming services, including Amazon and Spotify, who have  now formally objected to the new mechanical royalty rate set by the recent Copyright Royalty Board (CRB) ruling, with royalty rates for streaming and other mechanical uses set to rise 44% for the compulsory licences over the next five years. That decision was ratified last month (February 5th), when the CRB published the final rates and terms for songwriters. The top line revenue share figure to be paid by streaming services will rise, over a number of years, from 10.5% to 15.1%. 

The streaming companies were given 30 days to lodge official opposition to the ruling if they wished: Apple Music declined, but Spotify and Amazon, have now both filed a notice of appeal. Pandora and Google have also asked the CRB to review its decision. In a statement yesterday the National Music Publishers Association (NMPA) said that a “huge victory for songwriters is now in jeopardy” due to the streaming services’ filings. The NMPA called the appeal a “shameful” move which equates to “suing songwriters”.

Amazon, Spotify and Pandora issued a joint statement saying: "The Copyright Royalty Board, in a split decision, recently issued the US mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB's decision harms both music licensees and copyright owners. Accordingly, we are asking the US Court Of Appeals for the DC Circuit to review the decision".

The CEO of the NMPA, David Israelite, said last month, when the CRB's decision was confirmed, that if any of the tech companies did appeal the CRB ruling it would "in effect declare war against songwriters". He added: "Apple has announced it will not appeal. The others won't say. We will know soon whether some digital companies want to be partners or want to attack the songwriters who make their businesses possible. Stay tuned".

With the appeal process now confirmed, Israelite criticised the tech companies, noting that whilst the whole industry had collaborated to ensure the passing of the Music Modernization Act in the US, but that any hope that this kind of collaboration would become the norm "was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one third".

He added: "The Copyright Royalty Board spent two years reading thousands of pages of briefs and hearing from dozens of witnesses while both sides spent tens of millions of dollars on attorneys arguing over the worth of songs to the giant technology companies who run streaming services. The CRB's final determination gave songwriters only their second meaningful rate increase in 110 years. Instead of accepting the CRB's decision which still values songs less than their fair market value, Spotify and Amazon have declared war on the songwriting community by appealing that decision".

"No amount of insincere and hollow public relations gestures, such as throwing parties or buying billboards of congratulations or naming songwriters 'geniuses' can hide the fact that these big tech bullies do not respect or value the songwriters who make their businesses possible" adding "We thank Apple Music for accepting the CRB decision and continuing its practice of being a friend to songwriters. While Spotify and Amazon surely hope this will play out in a quiet appellate courtroom, every songwriter and every fan of music should stand up and take notice. We will fight with every available resource to protect the CRB's decision".

In a blog post, Spotify again responded saying that it believes “songwriters deserve to be paid more”, but argued that there are “significant flaws” in the CRB’s new rate structure. MBW says that although Spotify’s language on these “flaws” is, in parts, a little vague, but saying “We are supportive of US effective rates rising to 15% between now and 2022 provided they cover the right scope of publishing rights. But the CRB’s 15% rate doesn’t account for all these rights. For example, it doesn’t consider the cost of rights for videos and lyrics.” Israelite rubbished that suggestion too when contacted by MBW. He stated: “Wow. I didn’t think Spotify could sink much lower – but they have. This statement is one giant lie. I’m sure a PR team spent a great deal of time and energy crafting a statement to try to deceive artists and songwriters. They must think artists and songwriters are stupid. They are not.”

Elsewhere, Spotify's spat with Warner/Chappell in India continues, with Spotify insisting it can rely on compulsory licences provided for by Indian copyright law. Earlier this week the International Confederation Of Music Publishers said it supported the Warner publishing company in fighting Spotify's claim that where direct deals are not possible it can utilise a compulsory licence when streaming songs in India.

And whilst we are on Spotify, in Europe the streaming company has announced that it is filing a competition (anti-trust) complaint against Apple with the European Commission, regarding the latter's somewhat controversial 'app tax'. Apple currently charges any third-party app developer a 30% commission on all sales made through the Apple App Store – including music streaming subscriptions. Spotify co-founder and CEO Daniel Ek  posted a blog saying: "In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience – essentially acting as both a player and referee to deliberately disadvantage other app developers. After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition" adding "Apple requires that Spotify and other digital services pay a 30% tax on purchases made through Apple’s payment system, including upgrading from our Free to our Premium service. If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music. And to keep our price competitive for our customers, that isn’t something we can do.

Apple have now responded.

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