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Apple Is the Real Winner in Spotify’s Battle Against Songwriters’ Rate Hike

Streaming giant Spotify, after years of attempting to woo the songwriting community, is now at the front of an effort to pay it less. It’s a move that has seen the company, the market leader with 87 million worldwide subscribers, hand second-place Apple, with an estimated 43.5 million subs, an opportunity to make up ground.

At issue is the Copyright Royalty Board’s 2018 decision to raise the rate paid to songwriters by 44% over the next five years. Spotify, along with three other streaming services — Amazon, Google and SiriusXM/Pandora — is appealing that decision to the board, a move that has no direct precedent. The four companies have been shellacked with criticism by artists for their action.

While the streamers claim that their objection is to the CRB’s complex rules, particularly in the realm of bundling — including student and family subscriptions — there is little question that their primary goal is a lower rate. Apple, which would also benefit if the rate increase is nullified, is not part of the appeal.

The rights battle is particularly ill timed for Spotify, which was lambasted last year for a short-lived attempt to ban artists from its playlists who it judged were releasing “hateful content” or taking part in “hate conduct.” The service pivoted, highlighting its Secret Genius program, aimed at helping songwriters and producers by providing marketing campaigns and awards. Now, with Spotify’s opposition to the rate hike, creatives are questioning the company’s sincerity in claiming to be on the side of songwriters.

“We’re confused and hurt” by Spotify’s action, says songwriter Ross Golan, who hosts the popular “And the Writer Is …” podcast. “This one stings on multiple levels because here was this company that [through Secret Genius] reached out to songwriters and producers with hundreds of thousands, if not millions, of dollars’ worth of marketing in creating this environment where songwriters, artists and Spotify were building something together. We want the relationship, but don’t make it fake.” (Golan was among the dozens of hit songwriters who slammed Spotify over the CRB appeal in an open letter released Tuesday.)

Apple is most certainly winning the PR war, and as any seasoned entertainment executive would tell you, perception is everything.

Last month, days after Spotify appealed the decision on royalties, it turned up the volume in its battle with Apple, filing an official complaint against the company in Europe, contending that Apple unfairly limits choice and competition through the rules of its app store. But by waging war against both Apple and songwriters, Spotify risks sending creatives into the arms of the opposition.

As a sign of how badly the PR war is going, many songwriters are canceling Spotify subscriptions and doing so publicly on social media, where they make sure to note their subscription fees will now be going to Apple Music.

For its part, Spotify tried to save face by quietly planning “town hall” gatherings in Nashville and Los Angeles meant to explain the company’s stance on the CRB appeal directly to songwriters. However, word leaked out, National Music Publishers Assn. president David Israelite urged writers not to attend without a rep from a songwriter organization present, and the meetings, which were never officially announced, never happened.

There are those in the business who feel that Spotify is turning its energies away from music — a claim that a rep for the company soundly denied to Variety. In the past 18 months, it has spent hundreds of millions of dollars to acquire audio production companies (among them Gimlet and Anchor for a reported $337 million) to fortify its podcast slate. Dawn Ostroff, Spotify’s chief content officer, said as much at South by Southwest last month when she declared that the company’s mandate is to become “the world’s No. 1 audio platform.” It was hard not to notice the absence of the word “music.”

One label head said that Spotify, which made a splashy listing on the New York Stock Exchange last year, was bending to the pressures of being a public company that needs to generate numbers “to show that there is a future.”

But is it fair to blame the company that led the streaming revolution — which has not only saved the music industry but also has largely convinced a generation that grew up thinking music was free that it shouldn’t be — for trying to keep its fiscal head above water? As the global market leader — one that spends quite conspicuously on salaries, lavish offices and other accouterments that one might question from a company that’s losing hundreds of millions of dollars each year on the premise that profitability is inevitable — that point wins them little sympathy among the industry or songwriters. “Why not infuse more money into music education in schools and try to create better songs and better artists so there’s more appreciation for music?,” Golan offers.

Ultimately, Apple, which for years was the company the music industry most loved to hate, is now in an enviable position. If Spotify wins its appeal against the CRB — which is considered a long shot — Apple benefits by paying reduced royalty rates. If Spotify loses the appeal, Apple, by not joining the other streamers, looks like the hero.

And if, at the urging of songwriters, artists start jumping on a #CancelSpotify bandwagon, Apple Music stands to gain subscribers.

“Unlike Spotify, music is not Apple’s core business, thus allowing [it] to sit this one out, with Spotify taking the heat and the legal bills that follow,” says Jeff Rabhan, chair of the Clive Davis Institute of Recorded Music at NYU Tisch. “By choosing to watch this war from the sidelines, Apple has made a brilliant move by making no move at all.”

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