Spotify is changing the way it pays songwriters and publishers in the United States — cutting about $150 million in U.S. engineering royalty payments — and the music industry is speaking out.
By adding audiobooks to Spotify's premium, duo and family tiers, Spotify now claims it qualifies to pay a reduced “package” price to songwriters for premium streams since it now has to pay a license for both books and music from the same subscription price — which will be only a dollar higher than when music was the only offering.
Spotify argues that the addition of audiobooks reclassifies the service from a “standalone portable subscription” to a “group subscription offering,” according to the type of royalty rate provided in Phonorecords IV. The National Music Publishers Association (NMPA) and Nashville Songwriters Association International (NSAI), which represented the music business in the Phono IV proceedings, disagree with Spotify's reading of the settlement, with the NMPA calling it “cynical and potentially illegal movement”. This is a “perversion of the settlement we agreed to in 2022”.
Last week, Advertising sign estimated that this change would result in a $150 million cut in US mechanical royalties from premium, duo and family programs for the first 12 months, the package price is in effect, compared to what songwriters would earn if the three tiers subscriptions had never been grouped together. The change affects payments starting in March 2024, so it won't affect Spotify's premium, duo or family payments for the first two months of 2024. Specifically, the estimate refers to losses for the first 12 months after premium, the family and the duo. marked as a bundle, not calendar year 2024.
As Spotify grows, the music industry fears that the difference between payments to songwriters and publishers if the premium continues to be counted as a regular standalone service compared to what it will be paid now that music and audiobooks are bundled will continue to increase.
Spotify says it will soon offer a music-only subscription tier that will pay the same way Spotify premium used to, but there's no timetable yet for when that option will launch.
In March, Spotify released a statement about the change in bundle pricing, saying the company “is on track to pay publishers and communities more in 2024 than in 2023. As our industry partners know , changes to our product portfolio mean we pay in different ways based on terms agreed by both streaming services and publishers. Many DSPs have long paid a lower price for bundles compared to a stand-alone music subscription, and our approach is consistent.”
Here's an updated list of music industry reactions to the news:
National Association of Music Publishers (NMPA)
“It looks like Spotify is back to attacking the very songwriters who make their business possible. Spotify's attempt to radically reduce songwriters' payments by rebranding its music service as an audiobook bundle is a cynical and potentially illegal move that ends a period of relative peace. We will not support the distortion of the arrangement we agreed in 2022 and we are considering all options.”
Association of Independent Music Publishers (AIMP)
“Two weeks ago, we talked about the potential consequences for independent music publishers if Spotify goes ahead with its plan to combine a previously free service, audiobooks, with music subscriptions. Now that a real number has been put on the potential lost revenue for music publishers, a staggering estimate of $150 million annually, we feel the need to speak out again.
“It is a deeply cynical move for Spotify to attempt to circumvent the CRB settlement agreed by the NMPA & NSAI and DiMA in 2022 through this combination 'loophole' and further insulting that the price of a Spotify subscription will actually increase for users while cutting revenue for the songwriters who keep their business alive. This is particularly problematic for independent music publishers, as they and all publishers cannot legally negotiate protections against bad tactics like this, while record labels are allowed to do so in a free market.
“At this point, we do not yet know how Spotify plans to notify its subscribers of this change. The right thing to do is preselect existing subscribers to music-only accounts, then give them the option to add the audiobook service for an additional $9.99 per month — Spotify's suggested standalone price for audiobooks. This ensures a correct, non-discounted royalty rate for both music and audiobook publishers and rights holders, who would otherwise be adversely affected by bundling.
“AIMP offers its unequivocal support to the NMPA as they fight this critical battle to prevent Spotify's plan from being implemented. We encourage all independent music publishers to join this stance and inform their songwriters of this attack on their livelihood. We cannot allow bundling to become a precedent that can be used to deprive songwriters of their well-earned rights.
“AIMP has also spoken to the Coalition of Concerned Creators and is pleased to report that we are aligned on this issue. Find their statement on the matter below.
“From the Coalition of Concerned Creators:
“All musicians, creator advocacy groups, unions and organizations, and other concerned creators — including writers and podcasters — must stand firm against Spotify's recent policy change. It is important that we support fair compensation for music creators, who are critical to the viability of the industry. Additionally, this is a clear pattern of behavior, and we continue to be concerned about Spotify's bridge to new audio formats, such as audiobooks, and how this pattern of behavior will affect other creators, including authors.”
Nashville Songwriters Association International (NSAI)
“Spotify, we write about Spotify's decision to 'bundle' music with audiobooks, resulting in an estimated annual loss of up to $150 million in mechanical royalty payments to US songwriters, composers and music publishers. This attempt to reduce royalty payments to an already beleaguered songwriting community is in the worst bad faith and a perversion of the copyright board settlement that the Nashville Songwriters Association International (NSAI), the National Music Publishers Assn. (NMPA) and the Digital Media Assn. (DiMA) agreed to in 2022. It contradicts every statement Spotify has ever made that the company is creator-friendly.
“Bundling” music with other offerings without a music-only option is inconsistent with our view of the intent of the Copyright Rights Board (CRB) in the recent Phonorecord proceedings involving the NSAI. Furthermore, this move negates the earnings awarded to songwriters by the CRB. NSAI will not accept what we see as an attempt to manipulate the court's intent through a “team” ploy. NSAI is calling on Spotify to immediately reverse course and offer separate music subscription options at prices that will adequately reward songwriters.
“The American songwriting community is disappointed that this is happening while Spotify is reporting record profits, and while founder Daniel Ek has recently cashed out $180 million in stock options, including $118 million that practically coincided with the announcement of a 'package' that reduced Spotify annual rights obligation. The amount Ek cashed in conveniently reflects the estimated amount Spotify wants to squeeze off the backs of the songwriters who create the product that makes streaming services billions.
“Reporting record profits while reducing songwriters' royalties as the company's founder cashed in millions of shares demonstrates a greedy, insulting and callous disregard for the songwriters on whose backs these revenues are generated.
“Unanimously endorsed by the Nashville Songwriters Association International”
from our partners at https://www.billboard.com/business/publishing/spotify-songwriter-royalty-cuts-music-industry-reactions-1235681499/