The boss of Sony Music Publishing has sent a memo to the company’s songwriters updating them on the new battle with Spotify. The dispute was prompted by the streaming service reclassifying its main subscription package as a bundle in order to reduce its royalty obligations to writers and music publishers in the US.
Sony’s publishing business, CEO Jon Platt says, is “considering all options” to stop Spotify from claiming it can pay the lower bundle rate, which, he reveals, reduces payments by about 20%. That could potentially mean the publishers going legal as well as collecting society the MLC.
The compulsory licence that sets what streaming services should pay writers and publishers in the US has a provision for bundles. Spotify is now relying on that provision on the basis it offers access to audiobooks via a standalone package and as part of its main premium package.
“We do not agree with Spotify’s position”, Platt writes. While the compulsory licence “allows for a discounted bundle rate in certain circumstances”, he adds, “we do not believe this offering falls within the parameters that were agreed” the last time that licence was updated in 2022.
Providing a brief summary of the new Spotify battle to date, Platt explains, “Late last year, Spotify added an audiobook offering to its premium subscription tier. Spotify then unilaterally reclassified their subscription product as a bundle. They claim this enables them to pay a reduced mechanical royalty rate. In effect, Spotify is taking the position that all US subscribers are part of a bundle without choosing the bundle option”.
“Beginning with their March 2024 accountings”, he goes on, “Spotify began to pay at the discounted rate that they claim they are entitled. This has the effect of reducing mechanical royalty payments to songwriters by approximately 20%. The reduction does not currently impact royalties outside of the US”.
The National Music Publishers Association - of which Sony Music Publishing is a key member - has been scathing about Spotify's bundling tricks, with its CEO David Israelite previously indicating that his organisation’s members might consider legal action.
Then, last week, the MLC - the collecting society that administers the compulsory licence - filed a lawsuit against Spotify. Core to its argument is that, under the compulsory licence, a bundle must include music and additional content that has “more than token value”. The argument goes that fifteen hours of audiobook access that most premium subscribers never proactively requested does not have “more than token value”.
After referencing the MLC’s lawsuit, Platt adds that Sony is also “working with the National Music Publishers’ Association and considering all options” to force Spotify to continue paying the standard mechanical royalty to writers and publishers in the US.
He also notes that a number of other grievances were raised by the NMPA last week regarding Spotify’s display of lyrics within its app, and use of songs in videos and podcasts. None of those uses of songs are covered by the compulsory licence and the NMPA claims that there are gaps in Spotify’s other bespoke licences with the music industry.
“Earlier this week the NMPA sent a letter to Spotify putting them on notice that there are unlicensed videos, lyrics and podcasts on its service”, Platt's memo continues, adding that that letter was “an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform”.