Spotify Spars With Songwriters Over Contracts and Copyrights

Welcome back to Soundbite. Today we’re talking about Spotify agita. As always, reach me through email, and if you haven’t yet subscribed to this newsletter, please do so here . Tell a friend to sign up, too.

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Here are a couple stories I’m reading:

• ElevenLabs Inc., the unicorn artificial intelligence startup, launched a free iOS screen reader app in the US, UK and Canada. Listeners can choose from over 10 voices that can be used to read links, PDFs or other documents.

• Sony Music sent a letter to 700 companies telling them that they are not allowed to train on the record label’s copyrighted content without explicit permission and licensing.

Songwriters’ battle with Spotify heats up

Spotify Technology SA’s relationship with songwriters has seen better days.

The current clash, naturally, boils down to contract language. Things got started last month when the streaming service informed its publishing partners that, moving forward, it would be classifying itself as a “bundle” because it had started to include audiobooks as part of some subscribers’ plans.

“As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers,” the service said in a statement at the time. “Multiple DSPs have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent.”

The bundle classification, under a judge-approved agreement from 2022 called Phonorecords IV, functionally means that Spotify will pay a lower royalty rate to songwriters.

Billboard estimates royalty payments to songwriters and publishers could be reduced by $150 million in just the first year of the change.

As you can imagine, the switch didn’t go over especially well with the National Music Publishers’ Association, an organization that represents both independent and major label songwriters and publishers.

“It appears Spotify has returned to attacking the very songwriters who make its business possible,” David Israelite, chief executive officer at the NMPA, said in a statement at the time.

This week, the situation grew even more contentious.

Yesterday, the NMPA sent a cease and desist letter to Spotify over several other issues, involving products it claims are infringing on songwriters’ copyrights. The NMPA alleges that music videos, lyrics and podcasts on the platform are all using copyrighted music without the proper permissions.

“Making matters worse, Spotify profits from such infringement,” the letter states. “Accordingly, on behalf of our members, NMPA demands that unlicensed lyrics, music videos and podcasts be removed from the platform or Spotify will face copyright liability for continued use of these works.”

(For the podcasters reading this newsletter, the NMPA appears to be taking issue with podcasts distributed on Spotify that include unlicensed, copyrighted music.)

Israelite tied the timing of the letter directly to the broader bundling issue. “Before Spotify’s ‘bundling’ betrayal, we may have been able to work together to fix this problem, but they have chosen the hard road by coming after songwriters once again,” he said.

In response, a Spotify spokesperson called the letter a “press stunt filled with false and misleading claims.” They said the NMPA “agreed to and celebrated” its last contract negotiation, which included bundling language.

“We paid a record amount to benefit songwriters in 2023, and we are on track to exceed this amount in 2024,” the statement said.

Israelite was unmoved. “In our letter we raise the issue of unlicensed videos, lyrics and music on podcasts that they host on their site,” he told me. “If they would like to address those specific concerns, I’d be very interested to hear what they think is false and misleading.”

Recently, Spotify has been facing increasing pressure from investors to be profitable and to reduce costs, much of which involve payments to music rightsholders. Adding audiobooks to the platform — while important to Spotify because it diversifies the business and allows it to potentially charge more for subscriptions — also adds new costs. The company is essentially buying books for every user who partakes in the offering.

To afford this, the streaming service must find new savings from somewhere.

Odds and ends

Spotify adjusts a podcast ad rule

Elsewhere at Spotify, the company recently told podcasters who opt into its ads marketplace, called the Spotify Audience Network (SPAN), that they soon will no longer be able to set pricing floors for ads. This means, for example, that podcasters who might have only allowed Spotify to sell ads in their show at a certain price will have to settle for whatever Spotify gives them.

“Removing a price floor in a programmatic space can drive more competition for inventory, increasing the win price over time,” wrote Sounds Profitable, a research and consultant group. “However, SPAN is not programmatic, and it’s not clear if the change will introduce bid ranges for Spotify campaigns that take advantage of this new lack of price floor.”

From what I’m hearing, some publishers worry this could drive the price of podcasts ads down. Depending on whether demand increases, advertisers might be able to buy placements at a lower price than they could before. Others worry that the quality of advertisers could diminish. That said, plenty of others don’t seem to be fretting too much and instead are waiting to see how things shake out.

“Over the next few years, we will continue transitioning our ads business to be predominantly auction-based,” a Spotify spokesperson said in a statement. “Price floors could have adverse effects on publisher monetization due to the well-established dynamics of auctions and we are acting now to mitigate this.”

If you have thoughts on this development, let me know.

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