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Spotify Responds to Royalty-Appeal Criticism: ‘We’re Not Suing Songwriters’

UPDATED: Spotify has issued a response to criticism it has received in the wake of the announcement Thursday that it, Google, Pandora and Amazon are teaming up to appeal  a controversial ruling by the U.S. Copyright Royalty Board that, if it goes through, would increase payouts to songwriters by 44%. In a blog post, the streaming giant insisted that it is not suing songwriters, it does believe they should be paid more than they currently are, and that its issue is primarily with the “complex” CRB rate structure the “significant flaws” in the way it was set.

On Thursday, a joint statement from Spotify, Google and Pandora read: “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.” (The four companies filed with the court separately; Amazon did not participate in the above statement.) Apple Music was the sole major streaming company not to appeal.

The response from certain quarters of the industry has been ferocious: “Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one-third,” said National Music Publishers Association chief David Israelite, while veteran artist manager and Global Music Rights cofounder Irving Azoff tweeted, “Apple understands they’re in the artist business. Clearly, Google, Pandora, Spotify and Amazon don’t.” Veteran music business attorney Dina LaPolt was characteristically outspoken: “Spotify you cheap pieces of sh– — F— you and your secret bullsh– genius awards,” she tweeted. “You should be ashamed of yourselves. You too Amazon Music. Grow a set.”

In its blog post, Spotify attempted to explain its motivation. “In the U.S., the royalty rates for publishing rights for digital music services are determined by a panel of judges, the Copyright Royalty Board (CRB),” the introduction reads in part. “The rates also create a reference point for services that don’t rely on these government-set rates, and they indirectly influence the ways that publishing license rates work around the world. The CRB recently came to a conclusion about how these rights and rates would work for the next few years. And we appealed the outcome.”

The company then lays out its stance, FAQ style, printed in full below:

  • Is Spotify suing songwriters?No, Spotify is not suing songwriters. Spotify, Amazon, Google, and Pandora have each individually appealed the CRB outcome. The National Music Publishers’ Association, or NMPA, also filed an appeal. An appeal is the only avenue for anyone to clarify elements of the CRB ruling.
  • Does Spotify think songwriters deserve to be paid more?Yes – this is important to songwriters and it’s important to Spotify. The industry needs to continue evolving to ensure that the people who create the music we all love — artists and songwriters — can earn a living. The question is how best to achieve that goal.
  • Do you support the CRB rates?We are supportive of US effective rates rising to 15% between now and 2022 provided they cover the right scope of publishing rights. But the CRB’s 15% rate doesn’t account for all these rights. For example, it doesn’t consider the cost of rights for videos and lyrics.
  • So why is Spotify appealing?The CRB rate structure is complex and there were significant flaws in how it was set. A key area of focus in our appeal will be the fact that the CRB’s decision makes it very difficult for music services to offer “bundles” of music and non-music offerings. This will hurt consumers who will lose access to them. These bundles are key to attracting first-time music subscribers so we can keep growing the revenue pie for everyone.
  • So what’s the right way to split the pie?Music services, artists, songwriters and all other rightsholders share the same revenue stream, and it’s natural for everyone to want a bigger piece of that pie. But that cannot come at the expense of continuing to grow the industry via streaming. The CRB judges set the new publishing rates by assuming that record labels would react by reducing their licensing rates, but their assumption is incorrect. However, we are willing to support an increase in songwriter royalties provided the license encompasses the right scope of publishing rights.

In response, Israelite said in an emailed statement that reads in part: “Wow. I didn’t think Spotify could sink much lower – but they have. This statement is one giant lie. The CRB ordered a rate increase for songwriters.  Spotify is against it.  It really is that simple.” LaPolt tweeted, “FAKE NEWS FROM SPOTIFY! Straight up lies.” Amazon, Google and Pandora either declined comment or did not respond to Variety‘s requests for comment.

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