Since last week (May 15), the music industry has witnessed a growing conflict between music streaming giant Spotify and the National Music Publishers’ Association (NMPA), The Mechanical Licensing Collective (The MLC) and now Sony Music Publishing.
This controversy revolves around Spotify’s decision to reclassify its premium subscription plans as bundled packages, which has resulted in a significant reduction in royalty payments to songwriters and publishers.
Still, let’s take it one step at a time to better understand this conflict.
Spotify's decision
This dispute begins in early March 2024 when Spotify makes the decision to update the classification of its Premium Single, Duo and Family subscription plans as bundled subscription offerings. This change was justified by the inclusion in these plans of audiobooks available on the platform.
The real conflict is based on the fact that, according to the 2022 legal agreement known as Phonorecords IV (‘CRB IV’) signed between publishers and Spotify, bundled subscription services in the United States can pay a lower mechanical royalty rate compared to standalone music streaming services.
💡 Did you know…? The 2022 Phonorecords IV agreement sets the mechanical royalty rates for songwriters and music publishers in the U.S. for the period 2023-2027. This agreement is crucial in determining how much is paid for physical sales, downloads, and transmissions of musical works
Industry reacts: The MLC sue
The reaction from the Music Industry was not long in coming. The Mechanical Licensing Collective (The MLC), a non-profit organization appointed by the U.S. Copyright Office, filed a lawsuit against Spotify in the U.S. District Court for the Southern District of New York on May 16.
The MLC argues that Spotify is misapplying the rate formula used for bundled services. Applying these rates to its premium subscriptions results in an undervaluation of royalties for songwriters and publishers. According to the organization’s lawsuit, with the reclassification Spotify unilaterally reduced the revenue reported for Premium subscriptions by almost 50% without notice.
NMPA Letter
In contrast to the situation that Spotify had created among industry players, on May 15 the National Music Publishers Association (NMPA), issued a cease and desist to Spotify, accusing the platform of hosting lyrics, videos and podcasts without the proper license to do so.
The NMPA argues that these actions taken by Spotify constitute direct copyright infringement and demands that the company remove such content from the platform to avoid further legal consequences.
The National Music Publishers Association (NMPA) represents both independent publishers and the big three publishers – Sony Music Publishing, Warner Chappell and Universal Music Publishing Group – who believe Spotify is evading its legal obligations and affecting its members’ revenues.
Regarding the change in subscriptions, NMPA president and CEO Tim Ingham comments that ‘it’s something that we believe is legally questionable. Regardless of that, it is something that demonstrates their hostility to the songwriters who make their business possible.’
Sony Music Publishing comes in
Among the latest updates on this event, Sony Music Publishing (SMP) has also expressed its disagreement with Spotify’s decision. In a letter to its songwriters, Jon Platt, president and CEO of SMP, stated that mechanical royalty payments had been reduced by approximately 20% due to this change in subscriptions.
Platt further adds that Spotify’s action does not meet the criteria agreed to in the aforementioned Phonorecords IV agreement. Finally, it is made known that Sony Music Publishing is considering taking legal action in order to enforce the rates that were achieved in that agreement.
In this letter, the CEO of SMP points out that the reclassification of subscriptions to Spotify does not comply with the established conditions and is directly harming songwriters.
Looking for solutions
This situation underlines that there is still work to be done to achieve a fair balance between streaming platforms and creators.
Royalties not only represent a source of income for authors, composers and publishers, but are also a recognition of the value and effort behind each project. It is essential that the industry and its players reflect this reality and ensure adequate compensation.
Only through collaboration can we ensure a music ecosystem that benefits both creators and the platforms that distribute their work. The industry must come together to find solutions that foster innovation and ensure a balanced value for royalties, thus protecting the future of music.
In summary, the current landscape between Spotify and the music industry highlights the importance of respecting the rights of creators and finding a fair ground that allows both streaming platforms and songwriters and publishers to thrive in a dynamic and constantly evolving business.
