Spotify has confirmed it might stop offering its services in Uruguay if a performer equitable remuneration right for streaming is added to the country's copyright laws.
Those proposed copyright reforms have passed to the country's Senate this week. However, Spotify raised concerns about the changes back in July in a letter to Uruguay's Education And Culture Minister Pablo Da Silvera.
According to El Pais, in a letter to the politician, Spotify stated: "If the proposed reform were to become law in its current form, Spotify's business in Uruguay could become unviable, to the detriment of Uruguayan music and its fans”.
The principle of performer equitable remuneration exists in most country's copyright systems in relation to the broadcast and public performance of recorded music. It means that, when recorded music is broadcast or played in public, any performer who appears on the recording has a right in law to payment, oblivious of whether or not they own the copyright in the track.
Those payments are usually made through the collective licensing system. So, in the UK, income from the broadcast and public performance of recorded music flows through PPL, with 50% going to copyright owners, often labels, and 50% to performers, including session musicians.
ER does not generally apply to streaming, meaning labels and distributors negotiate deals with the digital platforms and then share any income with their artists subject to contact. But some reckon ER should be extended to streams.
Doing so would most benefit artists stuck in old record deals where a label is paying a lower CD-era royalty, and session musicians, who currently earn nothing from streaming.
In the UK, Parliament's culture select committee proposed applying ER to streams in its 'Economic Of Music Streaming' report and the subsequent Brennan Bill set out formal proposals for such a change. The government also commissioned a report on the potential impact of ER on streams, which is yet to be published.
Labels - major and indie - are generally opposed to ER on streams. For the streaming services, their position depends on how ER is implemented. Under the current UK system, the ER right is enforceable against the copyright owner not the user of music.
Which means the labels and distributors would continue to negotiate deals with the streaming services, but would have to allow some of the money those deals generate to flow directly to artists through the collective licensing system. The streaming services, therefore, wouldn't really be affected.
But in most countries the ER right is enforceable against the user. So performers, via their collecting society, can demand payment directly from the services. The services would then need to try to get an equivalent discount from their label and distributor partners the next time their licensing deals come up for renewal.
Even if they ultimately get that discount, there could be a period when the services are paying ER to the performers via their collecting society - SUDEI in Uruguay - while still paying the same rate to labels and distributors. Which, in Spotify's words, would mean they are "paying twice" for the same music.
The streaming services argue that, given they already pay the majority of their revenues over to the music industry, it is unfair and unviable for them to be expected to pay more, even in the short term. Although, ER does already apply to streams in a small number of countries, in particular Spain, with a few percent of total streaming revenues flowing through the ER system, and the streaming services have generally continued to operate OK there.
Nevertheless, with the ‘ER on streams’ conversation still occurring on a global basis, the industry will be watching developments in Uruguay with interest.