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US Congress members say Spotify’s Discovery Mode raises “significant policy issues”, ask Daniel Ek five key questions

By Chris Cooke | Published on Friday 4 June 2021

Two members of the US House Of Representatives have written to Spotify boss Daniel Ek stating that the streaming firm’s new Discovery Mode initiative raises “significant policy issues”. With that in mind, they want Ek to answer a number of questions about the scheme by 16 Jun.

Discovery Mode was first unveiled last November and is currently subject to a pilot. Under the scheme, artists and labels can influence the streaming service’s all-powerful algorithm, making sure that the Spotify machine is aware of the artist or label’s current priorities tracks-wise, or that any one track is particularly newsworthy or timely for some reason.

The algorithm will then prioritise that track when pushing the artist’s music to users it has already identified as being interested, or potentially interested, in said artist’s output – the pushing happening via Spotify’s personalised playlists, radio channels and auto-play function.

The new service has proven somewhat controversial in the music community, however, because there is a cost to utilising it. Basically the artist or label has to accept a lower royalty on any streams generated through Discovery Mode.

Some see that akin to the common practice in the CD era of offering retailers a discount if they gave a release a prime position in store. But others see it more on par with payola, the very dodgy and often illegal practice of bribing radio stations to playlist your music.

Either way, there has been plenty of criticism of Discovery Mode. Although it didn’t mention the Spotify service by name, the pan-European trade group for the indie sector, IMPALA, said in a recent white paper on the streaming sector: “We call on the entire music sector to stand with IMPALA to reject any proposals by services that reduce royalties for plays, or privileged treatment, in algorithms or other features. This is payola, and has no legitimate place in improving viability and opportunity for creators”.

The Artist Rights Alliance in the US, meanwhile, said Discovery Mode was a “cynical” move at at time when, because of the COVID shutdown, artists were more reliant than ever on things like the Spotify algorithm. The new scheme was “exploitative and unfair”, and: “Artists must unite to condemn this thinly disguised royalty cut”.

The ARA also argued that once Discovery Mode is rolled out across the whole Spotify platform, the benefits to artists would be nominal. “It’s likely to set in motion a race to the bottom in which many active artists feel compelled to pay up rather than risk being left behind in the battle for exposure”, it wrote in an op-ed piece in Rolling Stone.

“The unhappy result of this race? Artists and their labels end up receiving lower royalties without gaining any meaningful additional exposure at all, because if everyone is ‘boosted’, nobody is”, it went on. “If every artist, made even more vulnerable by the lack of touring income during the pandemic, pays up, there just won’t be any relative gain at all”.

You sense that Congress members Jerry Nadler and Hank Johnson were influenced by the ARA article when writing their letter to Ek. Nadler chairs the Judiciary Committee in the US House Of Representatives, while Johnson heads up another committee that has both intellectual property and the internet within its remit.

Although noting that the specifics of how Discovery Mode work aren’t entirely clear, they write that the new service “may set in motion a ‘race to the bottom’ in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment. Depending on how the programme is implemented, there is a further concern that accepting lower rates for this boost in Spotify’s algorithm may not even guarantee more airplay if virtually all commercial artists are also doing the same”.

The Congress members then run through the challenges music-makers have faced during the COVID pandemic; all the criticism Spotify has received from the artist community about the average per-play royalties it pays out; and the controversy around Spotify being involved in an appeal of the Copyright Royalty Board ruling that increased the streaming royalty paid to songwriters in the US.

“At a time when the global pandemic has devastated incomes for musicians and other performers, without a clear path back to pre-pandemic levels, any plan that could ultimately lead to further cut pay for working artists and ultimately potentially less consumer choice raises significant policy issues”, they write.

“This is particularly true under Spotify’s current model, where artists’ returns are already low, with Spotify reporting to pay artists less than a cent per song streamed (estimated in the $.003 to $.005 range) and Spotify has challenged an administrative ruling setting a higher royalty rate for songwriters”.

“Core copyright industries like music play an integral role in the US economy”, they then add, “and the vitality of the industry is undermined when artists’ hard work is undervalued. Such a race to the bottom threatens to weaken the core goal of copyright and intellectual property – incentivising creativity by offering a fair return on one’s work”.

With all that in mind, Nadler and Johnson ask Ek five questions. Among other things they want clarity on if and when Discovery Mode will be rolled out to all artists and labels, and how they will ensure that the service doesn’t become entirely ineffective once everyone is using it. They also want more clarity on what discount will be involved, whether all artists and labels will be charged the same rate, and how those using Discovery Mode will be able to measure the effectiveness of the service.

I think most of the music community will now await Ek’s answers with some interest.