Swedish Artists Looking To Take Labels To Court Over Spotify Royalties

from the surprisingly,-spotify-is-not-the-villain-here dept

A couple of major labels and Spotify are headed for a legal showdown, but not the way anyone would first assume -- and in, of all places, Sweden, where Spotify has enjoyed tremendous success. This isn't friction between Spotify and major labels coming to a head, but rather artists taking on the labels for devouring a majority of Spotify's payouts. It goes beyond inequitable royalty distribution, though. Those bringing the lawsuit are also accusing the labels of granting themselves rights they never had and infinitely extending those they do.

Even Thom Yorke can’t pull his old Radiohead classics from Spotify, because the label has those rights. But what if that isn’t quite true? That’s the question now being tested by Per Herrey and the Swedish Musicians’ Union, Svenska Musikerförbundet. The threatened lawsuits, first reported by Sveriges Radio in Stockholm, allege that labels are not only screwing artists, but extending digital streaming rights that they simply don’t have.

Herrey points to possible legal action against Universal Music Group and Warner Music Group, both majors that have received massive advances and equity shares from Spotify while passing little on to artists.
It's been argued several times on this site that Spotify's royalty payments, which are portrayed by its opponents as insultingly low, aren't truly or completely its fault. Someone's taking a huge portion of those payouts before they hit the artists. Spotify pays out over 70% of its revenue in royalties, a percentage the labels certainly aren't willing to match. Herrey compares the payout artists receive from their labels -- which he estimates is only 6-10% of what's collected from Spotify -- to the normal radio payout, which is split 50/50. A streaming service comprised of mostly non-paying members is going to be hard-pressed to generate sizable artist incomes, but the labels' ability to grab 90% of the payments makes it impossible.

The additional accusation suggests the labels are working to make this situation even worse. According to Herrey, labels are crafting digital rights ownership out of thin air, especially on older, long-running contracts. Herrey suggests the labels should remove all digital works until these contracts can be renegotiated to deal with the shift in content consumption.

Herrey's suggestion (and planned lawsuit) can probably be traced back to Eminem's successful suit against UMG. UMG had been (and likely still continues to do so) playing terminology games in order to maximize its share of royalties from iTunes. UMG called these "sales" in order to claim 85% of the royalties. Eminem's legal team called them "licenses," which would have meant Eminem was due 50% of each sale/license. As anyone who's seen the amount of restrictions applied to your "purchase" of a track from iTunes can attest, you're not really "purchasing" these songs from iTunes -- you're merely "renting" them. Any right of first sale does not apply to most digital goods. Hence, a "license" rather than a "sale."

If UMG's shifty semantics are any indicator of common major label tactics, there's little doubt the digital rights conjured up have been been severely tilted in the labels' favor. And if Herrey's statement about the 6-10% trickle-down from Spotify is correct, then the labels are utilizing some very generous contractual language that somehow views a streamed song as a "sale." Or, perhaps, it doesn't address it at all and hopes the affected artists won't notice.

Filed Under: artists, labels, royalties, sweden
Companies: spotify


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  1. identicon
    Anonymous Coward, 30 Oct 2013 @ 8:16am

    Re: Re: And now some real numbers for stoner "S. T. Stone"

    I don't know why I'm bothering to do this, but...

    You don't even bother with real numbers! You just: "Assume Spotify makes one dollar for every song played."

    Congratulations on leaving this bit out.

    (Itís a hypothetical. Run with me.)

    It's an example blue, using the hypothetical example of 1$ makes the math easier to follow. We are all well aware that the actual royalty rate is nowhere near that high.

    The only thing you have shown here is that you are still incapable of taking things within context.

    Moving on:

    The other grifters may well be scraping off 90%!

    Ahh, so you do admit that this is really a problem with the Labels. I like how you avoid actually calling them out though and simply refer to them as "the other grifters", very clever.

    Here's the thing, Spotify is providing a service to artists and they cannot be expected to provide that service for free. Likewise, the Labels provide a service to artists, and likewise they cannot be expected to provide that service for free. The quibbling point here is over what is a reasonable rate for Spotify and the Labels to to charge the artists for providing their services. Round these parts, most people agree that the rate Spotify charges is reasonable, and the rate the Labels charge is not.

    So my question to you (and I have zero expectation that you'll answer) is do you agree that it is reasonable that Spotify and the Labels charge artists for their services, and if so, since you apparently don't agree with the current rates, what rates do you propose would be reasonable? Or do you actually propose that Spotify provide it's services to the artists for free?

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