Spotify has announced a new partnership with the US National Music Publishers Association that gives independent publishers the option to enter into licensing deals covering the use of their music in video content on the streaming platform.
This new partnership, says incoming Spotify co-CEO Alex Norström, “will increase revenue for songwriters and independent publishers who are the heart of the industry”. Which is good news, given Spotify has been mainly focused on reducing revenue for songwriters and publishers in the US in the last couple of years.
Spotify has been ramping up its video content again of late, including by making music videos available in many markets. In most countries, when it comes to song rights, Spotify negotiates bespoke licensing deals with music publishers and collecting societies. As things like video content are added to the platform, it needs to adjust those deals to ensure video is covered.
However, in the US, Spotify has - until recently - mainly relied on the compulsory licence available under American copyright law to cover its primary music service. That licence covers the so called mechanical rights in every song ever written, with royalty rates set by the Copyright Royalty Board and administered by The MLC.
It’s the compulsory licence that includes the controversial bundling discount which Spotify has been applying since it added audiobook access to its premium subscription product. That discount allows Spotify to reduce what it pays to songwriters and publishers. Its use of the discount has been slammed by the music industry and is currently the subject of litigation being pursued by The MLC.
But, crucially, the compulsory licence only covers audio not video. So as soon as songs appear in videos on the Spotify platform, the streaming service needs to secure bespoke licences from music publishers.
Since the bust up over Spotify employing the bundling discount on the compulsory licence, the three majors, BMG and Kobalt have all entered into direct licensing deals with the streaming service. Those deals circumvent the compulsory licence entirely, but also include the use of music in videos.
Indeed, it was because Spotify needed licences covering videos and other product innovations that the big publishers were able to force the streaming service to the negotiating table, even though on its core music service Spotify could rely on the compulsory licence within the US market, bundling discount and all.
But what about smaller indie publishers who aren’t in a position to negotiate bespoke deals? Well the NMPA has often negotiated template licensing agreements on behalf of its smaller members, which is what has happened here. However the template deal only covers video content, participating publishers will still receive mechanical royalties from audio streams via The MLC at compulsory licence rates.
The NMPA has welcomed the partnership around video content, though it isn’t hyping the development up too much, given it’s still at war with Spotify over the bundling discount.
CEO David Israelite says, “We are pleased that this deal offers indie publishers the chance to enter into direct deals with Spotify in regard to audiovisual streaming functionality on the platform alongside the recently announced larger publishing companies. This new income stream reflects the growing value of songs as digital platforms offer new capabilities to consumers”.