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 @ 9:29am

    Re: Re: Re: Royalty rates, new media, old media

    I'll address a few points, if you wish to discuss further I will be back online tomorrow:

    "However, a Spotify listen is not the same as a radio broadcast either, an analogy many make in their calculations."

    It's the closest analogy we have, as the reality is somewhere between traditional music distribution and radio airplay. But, however it's spun it's not a purchase and thus both what the consumer receives and what is paid differ greatly. It's not a great comparison to talk about radio rates, but at least that's apples to pears rather than the apples to real estate analogy of CDs. If you have a closer analogy, I'm all ears.

    "Basically, what you are buying with Spotify is the right to listen to a track that you wish, at a moment of time you wish. The difference of having an offline playlist to just having a bunch of DRM'd MP3 files tied to a client machine is something I don't see"

    Well, if you're bringing DRM into the equation then you're already talking about something than CDs. A CD is a non-DRMed collection of an average of 15-20 tracks with no limit on when, where and how they may be consumed, including additional rights such as resale. Spotify is an on demand service that only grants you access to one track at a time with no additional rights beyond playback and no guarantee that any specific track will be available at any time (music is added and removed all the time).

    There's a massive number of differences. In fact, apart from the fact that they both deal with music, there's very few realistic similarities.

    "Comparison to radio is irrelevant, because radio plays what it wants, not what the customer wants to hear."

    In terms of compensation to artists, so what? Does it matter whether a radio station played the new Miley Cyrus song once to 100,000 listeners or 100,000 people listened to that song individually in terms of royalty payments? If so, why? What's the difference (other than lack of payola control over whose song gets played of course)?

    "There's a reason that internet radios - which are so plentiful everyone should be able to find one they really like - are rarely discussed, but Spotify is always a hot topic."

    Partly because the RIAA spent its time trying to kill internet radio before Spotify existed. From memory, it was around 2006 when they passed a bill insisting on royalties that killed many smaller outlets. Many of those still operating do so only because they're small or niche enough to escape the RIAA's attention. They then spent their time trying to make sure nobody outside the US could access services like Pandora and Rhapsody. Spotify is not only more relevant to today's market reality, but it's the current favourite target. If they lose their plce as the market leader, the attention will turn to whoever comes next.

    Spotify is "always" a hot topic because they're currently the most successful at addressing consumers' needs. But even that whining didn't really start till they entered the US market (though there were some complaints before that).

    "On the licensing: The privileges and responsibilities afforded by national and international laws is a jungle of which I have little understanding,"

    I'll agree here. Which makes it even more frustrating that the industry's efforts have been in keeping those artificial barriers rather than allowing them to move into a modern world where geographical barriers mean a lot less, especially to the consumer. I dare say that if the last decade had been spent adapting to the way the world was clearly moving rather than trying to regain the market realities of 1996, we wouldn't be talking about most of this stuff.

    "For instance, did you know music videos shot in the USA do not bring profits to the performers when shown in Europe"

    Citation? I have no doubt that this happens, but it's doubtful that music videos made by Warner Brothers shown legally on MTV Europe don't include payments to Warner artists, even if they're made through Warner's European division. It seems somewhat strange, given that the music has to be licenced with royalties going somewhere. I'm happy to defer to any actual evidence, however.

    "Reasonable isn't what one gets from radio airplay per person."

    Again, why? It's worked for radio for many years, the only difference here is that people can get to listen to what they want rather than what's prescribed by a radio station. Or, considering payola, more realistically by major labels. Which is probably the real issue here - lacking the control, people may not listen to what they want to sell.

    "If everything was in Spotify and everyone in USA had a license, it'd only cost about 15 USD per person in a year."

    I'm in Europe and I spend 10/month to Spotify (to remove ads and access extra features such as playlists). That's 120/year and is more than I spent on music every year before Spotify came alone (I stopped buying CDs as my lifestyle made them far less convenient and refused to buy downloads infected with DRM - I have far fewer qualms about renting music with such restrictions, but am unwilling to pay as much for them individually).

    Add to that the fact that people who listen on Spotify don't suddenly stop consuming music in any other way (including purchases), and that's not really a convincing argument that they're doing something wrong.

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