Spotify and other streaming services now face higher royalties bills

29 Jan 2018

Spotify app. Image: Syafiq Adnan/Shutterstock 

Spotify, Apple Music and Pandora will have to pay more to artists in the US as royalty rates increase.

For as long as streaming services like Spotify have been in existence, musical artists and songwriters have raised concerns about the unfair returns received for the streaming rights to their work.

Streaming – a bone of contention

Bands like The Black Keys and Foals have spoken out against streaming services’ business models and, in 2014, Taylor Swift wrote an op-ed for The Wall Street Journal announcing she would be removing her back catalogue from the platform (she has since made the return).

On Saturday, 27 January, the Copyright Royalty Board (CRB) of the US Library of Congress issued a written decision outlining major changes to how revenues from streaming companies are shared with songwriters and music licensing firms.

For the next five years (2018–2022), songwriters and music publishers will get a higher payout from on-demand subscription services like Apple Music and Spotify. Rates will increase from 10.5pc to 15.1pc of revenue during the five-year term.

That’s a major increase of 43.81pc over the term, although details about when the increases will come in and the intervals they would come in by are still not public. The 15.1pc will be split between the mechanical and performance royalties to publishers and songwriters.

Music publishers pleased with the outcome

CEO of the National Music Publisher’s Association (NMPA) David Israelite said he was “thrilled” at the raised rates.

He added: “The ratio of what labels are paid by the services versus what publishers are paid has significantly improved, resulting in the most favourable balance in the history of the industry.”

The board behind this month’s decision consisted of three judges, who held a trial last year in which the NMPA went up against major firms Spotify, Apple, Alphabet, Pandora and Amazon.

US law requires the CRB to set the rates for mechanical licences as opposed to letting publishers negotiate directly with the streaming services.

None of the affected companies have commented on the decision, but many analysts are speculating that it may result in possible subscription price increases.

The Nashville Songwriters Association International said: “Songwriters desperately need and deserve the rate increases resulting from the Copyright Royalty Board trial.

“The CRB was a long and difficult process but songwriters and music publishers together presented a powerful case for higher streaming royalty rates.”

Historically, streaming service payouts worked on a three or four-tier basis, with each tier having a formula to deduce a bucket of revenue payouts. These buckets would then be measured against each other with the greater amount chosen for the payout.

The increases may not affect Apple, Google and Amazon in a major way as the firms all have deep coffers, particularly in comparison to smaller outfits like Spotify and Pandora.

The music publishers had been advocating for a two-tier method, but this was not granted.

Songwriters will now also be allowed to claim late fees if they are not remunerated in good time.

Spotify app. Image: Syafiq Adnan/Shutterstock 

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects