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. icon
    PaulT (profile), 1 Nov 2013 @ 4:11am

    Re: Royalty rates, new media, old media

    You're missing the major point - a Spotify listen is not a sale. Nothing like it. The consumer does not own the track along with all the rights that implies. They don't have access to physical medium, cannot time shift, does not retain access to the track if it goes out of print (removed from Spotify), cannot copy to another medium and cannot resell the product.

    Therefore, apples to oranges. The reason compensation is different to a CD is that it's a completely different product. They get compensation based on the service rendered, not on what they'd ideally like to have for their most valuable product type.

    Do you have any figures on something that's actually comparable both in scope and product type, such as per-listener radio royalties? I'd honestly love to see some real figures on comparable products rather than misdirections and irrelevant comparisons.

    You can argue that for some consumers Spotify replaces sales, but it's really not as simple as that for most consumers. Plus, so what? If I opt to rent a car instead of buying a new one, that doesn't mean it would be right for Ford to force Hertz to charge me whatever revenue they'd get from a new purchase. They'd have to deal with the market as it stands - why can't the record companies?

    "Instead, the numbers for reasonable royalty rates should be fixed first with regards to artist compensation and record company compensation"

    You haven't been following this, have you? Spotify can only operate on agreed licences with its suppliers, very successfully so far since they're able to offer music to many more countries than many of their competitors. The major labels' response has been trying to charge Spotify so much money that they could not possibly operate. Spotify already pay most of its revenue out in compensation to labels, squeezing them for more could put them out of business and get the labels $0. They do tend to operate on a fantasy where if only everyone was forced to buy a new copy instead of streaming or pirating then they'd make all the money in the world, but that's not reality.

    As for "artists compensation", did you read the article above? The one about how labels are not paying the artists the money they've collected from Spotify? Why is this Spotify's problem to solve?

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