Dec 14, 2023 2 min read

Spotify won't exit Uruguay following clarification to new ER rule in copyright

Spotify will not now exit the Uruguayan market after the country’s government clarified that labels and distributors, not streaming services, will be responsible for new equitable remuneration payments for performers

Spotify won't exit Uruguay following clarification to new ER rule in copyright

Spotify has back-tracked on its threats to exit the Uruguayan market. The news follows a blog post earlier this month in which the streaming firm declared that it was being “pushed out of Uruguay” by a change to copyright law that meant its business would become “unsustainable”.

The about-face comes after the country’s government confirmed that those copyright reforms - termed “dramatic changes” by the streaming company - would not in fact increase how much money Spotify has to pay over to the music industry each month.

"We’re pleased to share that Spotify will remain available in Uruguay and will continue to give artists the opportunity to live off their art", it said in a statement yesterday. "The Uruguayan government has demonstrated that it recognises the value Spotify provides to local artists, songwriters and fans".

The change to copyright law in Uruguay provides performers in the country with an equitable remuneration right on streaming. That means any performer who appears on a recording has a right to payment, through their collecting society, when a track is streamed, even if they don't own the copyright in the recording, and oblivious of any deal they have with the copyright owner.

ER applies in most countries when recorded music is broadcast or played in public, but in most places not on streams. What wasn't clear with the new streaming ER right in Uruguay was whether the streaming service - or the label or distributor that controls a recording - was responsible for paying any ER that is due.

If it's the streaming service, Spotify argued, that would mean it has to pay twice for each recording. And it is already sharing up to 55% of its revenues with the labels and distributors.

Of course, the next time its music industry deals come up for renewal, Spotify could seek to deduct any ER payments from what is paid to each label and distributor.

Indeed, CMU has confirmed that at least some of Spotify’s existing deals with distributors allow for such deductions to be made if any new ER payments come into force - albeit sometimes with a cap - the streaming service having anticipated that ER might be added to streaming in some countries.

Those provisions may well not be in all the deals, especially with the majors. Because if they are, it would greatly weaken Spotify’s justification for leaving Uruguay following the copyright reforms.

Either way, Spotify was adamant that the ambiguities in Uruguay's new ER rule meant that it could end up paying even more into the music industry. And, once payments to music publishers and songwriters are taken into account, in some cases the industry is already getting 70% of its revenues. Paying over more than 70% was just not viable, the streaming service insisted.

Hence the announcement last month that Spotify would bail on Uruguay at the start of next year. That resulted in a petition signed by more than 40,000 Spotify users in the country demanding that politicians urgently sort things out. Even President Luis Lacalle Pou got pulled into the drama, reassuring reporters that ministers were "in talks" with the streaming platform.

Those talks and a subsequent 'regulatory decree' have seemingly reassured Spotify chiefs. “The clarification to the recent changes in music copyright law", it said yesterday, "means that the rightsholders - to whom Spotify already pays roughly 70% of every dollar it generates for music - should be responsible for these costs".

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