The music publishers in the US have hit out at Spotify for sneakily reclassifying its subscription packages in a way that decreases the royalties it has to pay songwriters and publishers. By employing some audiobook shenanigans, a standard Spotify premium subscription is now a bundle, which has an impact on the royalties due under the compulsory licence that applies in the US on the songs side.
“It appears Spotify has returned to attacking the very songwriters who make its business possible”, says David Israelite, boss of the US National Music Publishers Association. “Spotify’s attempt to radically reduce songwriter payments by reclassifying their music service as an audiobook bundle is a cynical, and potentially unlawful, move that ends our period of relative peace”.
When Spotify first added audiobooks to its platform they were available on a pay-per-access basis. Then, in some countries, all premium users started getting access to up to fifteen hours of audiobook content each month as part of their existing subscription. Then in March, Spotify launched an audiobook-only subscription in the US which also provides fifteen hours of content a month, though at $9.99 that didn’t seem like particularly good value.
Ever since Spotify has pushed into podcasts and audiobooks, the music industry has worked hard to ensure that that doesn’t impact the royalty pool in which it shares, meaning Spotify has to find other ways of making money from those other content types. However, on the songs side in the US, Spotify relies in part on the compulsory licence covering mechanical rights, the terms of which are ultimately set by the Copyright Royalty Board.
That licence has different terms for bundles, where a platform bundles music with other content, like Amazon Prime or the Apple packages that also include Apple TV. The music publishers and songwriters earn less on those bundles. Because Spotify now has a standalone audiobooks service, as well as offering audiobooks within its main premium package, it can now classify the latter as a bundle and pay the bundle rates.
Says Spotify, “As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers. Multiple digital service providers have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent”.
The streaming services, and especially Spotify, have had a fiery relationship with the publishers and songwriters over the years as the terms of the compulsory licence have been negotiated in front of the Copyright Royalty Board.
Though, as Israelite notes, more recently relations have been better after the NMPA and the services agreed a deal on the current terms of the compulsory licence. But Spotify’s bundling tricks mean a new war is now seemingly upon us. “We will not stand for their perversion of the settlement we agreed upon in 2022 and are looking at all options”, Israelite adds.