Music and podcast streaming app, Spotify, is claiming that they have been paying their artists and music publishers more than what is mandated by new regulations, and they’re asking them to pay the excess back.
The issue stems out from the new guidelines set by Copyright Royalties Board (CRB) that allows for almost 44% increase in the royalties that music streaming services should pay music publishers — a move that has been contested by Spotify together with its contemporaries like Google, Pandora, and Amazon.
In the new regulation, CRB raises the royalties by 43.8 percent over the next five years. Spotify — which reportedly pays out $0.006 to $0.0084 per stream, split between rights holders (songwriters, publishers, etc.) — is said to have made wrong calculations of payouts to artists, producers, and other publishers.
The miscalculation comes from the convoluted and vague clause of the new guidelines involving family plans and student plan subscriptions — which Spotify and other music streaming services are charging less for. Music Business Worldwide reports that the agreement requires family plans to be counted as 1.5 subscribers per month and student to be counted as 0.5 subscribers per month.
“According to the new CRB regulations, we overpaid most publishers in 2018. While the appeal of the CRB decision is pending, the rates set by the CRB are current law, and we will abide by them — not only for 2018 but also for future years in which the amount paid to publishers is set to increase significantly,” a spokesperson for Spotify said.
But because the error comes from Spotify’s miscalculation, the company is giving overpaid artists to return the surplus payment to Spotify until the end of 2019.
“Rather than collect the 2018 overpayment immediately, we have offered to extend the recoupment period through the end of 2019 to minimize the impact of the adjustment on publishing companies,” the spokesperson added.
Major players fight against a royalty rate increase
The decision of the CRB to increase royalty rates up to 44% in the next five years, major key players in the music streaming industry such as Spotify, Pandora, Google, and Amazon have appealed to the Board against the planned increase.
Meanwhile, Apple said that they don’t have plans on filing appeals regarding the new guidelines – a decision that is understandable considering that the tech giant has already published on how to suggestions for how to “fix” royalties.
The music streaming service providers are citing the harms that the new regulation can cause “music licensees and copyright owners.”
“The Copyright Royalty Board (CRB), in a split decision, recently issued the U.S. mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB’s decision harms both music licensees and copyright owners. Accordingly, we are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision,” reads the joint statement of Spotify, Pandora, and Google.
Spotify invests on podcasts
The ruckus regarding the new payment scheme for music producers could be the reason for the newly renewed interest of Spotify to invest in podcasts. Spotify is all-in with podcasts as it launches a redesigned user interface (UI) that refocuses Spotify into two different audio categories: Music and Podcasts. While it is not new that podcasts and audio shows are already thriving in the app, Spotify makes it easier for listeners to navigate the app to search for their favorite podcast shows.
The new design emphasizes bolded headings for both “music” and “podcasts” on the app’s library page. Currently, Spotify users have to sift through six categories at the top of their library pages to find a dedicated podcast section.
According to Spotify, last year, “seven million people in the US produced podcasts—and even more, people consumed them.” And it makes sense why the app company is putting money on podcasts on its platform. Spotify has spent up to $500 million on podcasts alone. The spending included their acquisition of major companies like Gimlet Media.
The equivocal emphasis of Spotify to spend on promoting podcasts on its platform says so much about its goal to compete with Apple and Luminary to try to become the go-to place for podcast listeners, and improving “discoverability” and ease of use is necessary to achieve their goal.