Fact Checking: “Spotify Songwriters and Publishers Administration System”
Last week, Spotify Global Head of Publisher relations, James Duffet-Smith published a piece on the “Spotify Artists” blog, discussing a major point of contention between the service and rights holders, properly accounting royalties to songwriters and publishers. In it, James announced Spotify’s commitment to help solving the issue globally.
I feel like this is a great time to introduce a new feature to my blog, titled Fact Checking. Every so often, we’ll look at a recently released editorial, press release, or study regarding something in the music industry, and see if what’s being said actually checks out.
Quick side note: Spotify probably wrote this post with the best of intentions, although the timing, right before the holidays, is pretty strange. You’d think that a post like this would be published when the music community isn’t largely out on vacation. Unless you didn’t want people to talk about it, of course.
Below you’ll find the post in italics broken up into several pieces, so we can take a closer look at everything being said. Issues to be verified are in bold. I’ll also try to provide some additional context for the entire piece.
Spotify was founded for two reasons: to bring all the music in the world to all the world’s music fans in a fun, easy and affordable way — and to create real value for the music industry again, including labels, publishers and the terrific songwriters and artists who create and perform the music we love. We’ve paid well more than $3 billion in royalties to date, including $300 million in the first quarter of this year alone.
The continued growth of Spotify is a frequent story on digital music news sites. We’re witnessing the first interactive streaming service start to operate at a scale that actually makes business sense. Last November, co-founder/CEO Daniel Ek wrote of the service paying out over $2 Billion to rights holders, with the last billion coming in between 2013 & 2014.
One of our core commitments is making sure that everyone involved in the creation of music is paid fairly, rapidly, and transparently. Unfortunately, when it comes to publishing and songwriting royalties, especially in the United States, that’s easier said than done because the data necessary to confirm the appropriate rights holder is often missing, wrong, or incomplete.
Fact. If there’s one issue that’s constantly harped about in publishing (excluding payout rates), it’s the lack of a reliable database for rights holder information. This becomes an issue for licensing and royalty payments, because unlike most of the developed world, there isn’t a mechanical rights society that represents the songwriting community as a whole within the US. Which means you can’t just wrap up your publishing obligations with a blanket license, as you could in the UK, for instance. You’ve got to secure tens of thousands of licenses at the very least.
Since Spotify needs to account direct to publishers for mechanicals (in addition to performance rights), they’ve got to rely on publishing information that they receive either A) directly from publishers, B) from tech copy provided by record labels, and C) from public and private databases of publishing information (ASCAP, BMI, HFA, etc). Each of these information sources comes with it’s own list of shortfalls. They’re all managed by different parties independent of one another, and are susceptible to providing information that conflicts with each other. Bad publishing data is a re-occurring theme of James’ post, and we’ll touch on it more below.
Today we are excited to announce that Spotify will invest in the resources and technical expertise to build a comprehensive publishing administration system to solve this problem.
Spotify currently contracts Slingshot, a service of the Harry Fox Agency (HFA), to handle their mechanical licensing. HFA also represents a notable portion of the publishing community within the US for mechanical rights, so they have a lot of information on compositions within their own database.
This seems to infer that Spotify will be developing a system on their own, potentially weaning themselves off of HFA’s assistance. If that’s the case, what immediately springs to mind when I think of a “comprehensive” publishing administration system, is one that provides the following infrastructure:
- Database which contains ownership information of songs, divided by performance and mechanical rights types (and potentially others, if Spotify ever intends to provide additional services to consumers).
- A system which matches the compositions to sound recordings that are actually streamed on Spotify (perhaps utilizing ISRC & ISWC numbers, or custom internal IDs).
- A system for handling disputes between publishers on song ownership.
So what exactly is the problem? Music industry licensing and copyright structures are legendary in their complexity — and they change from country to country and agreement to agreement.
Fact. Spotify ain’t lying. Rights structures on songs, while a fun point of conversation amongst IP lawyers and other bores, are complex and can vary widely from country to country for multiple reasons. You look at a song like “YMCA”, which co-author Victor Willis has recaptured his portion of the songs’ copyright within the U.S., due to how copyright law works here [1], but is still completely controlled by the original publisher within the rest of the world.
One of the most difficult challenges is the lack of accurate data as to who owns the rights to a specific track, especially when it comes to songwriter and publisher rights. In many cases, the ownership of the rights are not even finalized when a record is released;
Fact. The reason for the lack of reliable publishing data can be pointed in many directions, but it starts at the source: songwriters and publishers. If publishing credits can’t be sorted out by the time of a song’s release, it makes it impossible to legitimately license the composition, let alone payout any royalties.
Just look at the credits for this A$AP Ferg album. Look at all the “Publishing Designees”! For those that are unfamiliar, a “publishing designee” is used as a placeholder until a songwriter can actually setup his or her publishing company. How is Spotify supposed to have licenses in place on “Hood Pope” in time for the album’s release, when none of the publisher’s listed in the songs’ credits exist?
in many other cases, rights are held by multiple parties, rights change hands, and rightsholders remain entirely unclear.
Fact. The amount of parties involved in a single song can be quite high, especially a sample and feature laden rap song.
When one of our listeners in the US streams a track for which the rightsholder is not immediately clear, we set aside the royalties we owe until we are able to confirm the identity of the rightsholder. When we confirm the rightsholder, we pay those royalties as soon as possible.
Fact…probably. Slingshot, an HFA service, has no reason to withhold royalties, especially from potential HFA members. So as long as Spotify is correctly reporting plays, royalties would eventually be paid out.
Hilariously enough, just before I hit “Publish”, news broke that musician David Lowery of The Trichordist is filing a class-action suit against Spotify, to the tune of $150 Million dollars. The suit appears to be brought on by the above text, in which the service is tacitly admitting to playing content on its’ service for which the mechanicals have not been licensed.
To put this all in context, the royalties we have set aside amount to a fraction of one percent of all the royalties we have paid — but that doesn’t change the fact that those royalties are important revenue to songwriters and publishers and we want to make sure they end up in the right hands.
Contextually Misleading…. I’m sure they’re not lying when they say less than one percent of royalties have been paid out, but I’m a little dubious that this tells the whole story. The $3 Billion in royalties that they mention at the beginning of the post refers to both master and publishing royalties. They’re clearly only referencing songwriters and publishers here though. The reason is because they’re probably not hurting to find master owners (or licensors). Spotify receives sound recordings for use on their service through distributors, and it’s those distributors that they pay master royalties to.
Therefore, that one percent is most likely almost entirely publishing royalties. It’s then important to remember that publishing royalties represent around 20% of the total royalties paid out by services like Spotify. Which means, it’s probably best to look at how much in terms of publishing royalties have been held onto. I’d imagine it’s greater than one percent, though probably less than ten.
Of course, that doesn’t touch on an issue that also stems from the lack of a reliable publishing database, outdated information. Spotify may be holding onto say, 5-ish percent of all publishing royalties, but who knows how much money was inadvertently wired to the wrong party because someone listed “Copyright Control” as their publisher on some tech copy.
This is a global problem — outside the U.S., publishing rights organizations and collecting societies who receive royalties on behalf of songwriters and publishers face similar challenges. And it is a complex problem — we are committed to solving it, but it is going to take significant time and effort. In the meantime, we have been working closely with our partners and friends in the industry, especially the National Music Publishers Association (NMPA), to find the best way to correctly pay the royalties we have set aside to the right publishers and songwriters. But we want to do better than that — we want to fix the global problem of bad publishing data once and for all, and that’s why we’re making this commitment today.
True. Overseas societies aren’t immune to the issues that are presented within the U.S. Just because Spotify could technically secure both a performance & mechanical license from PRS for UK streaming, doesn’t mean that the royalties would flow directly to the correct writers and publishers. Intermediaries are susceptible to the same issues that plague services like Spotify.
Overall, the post sounds like an attempt to deliver an olive branch to the publishing community, much of which is very distrusting of Spotify. I attended the 11/17 AIMP event, which featured a panel of SESAC and HFA executives. A large portion of the questions centered around whether Spotify, one of HFA’s clients, was truly paying what they owed in mechanical royalties to publishers.
Anyway, it’ll be interesting to see what this commitment ends up looking like. Could we see the comprehensive system that I wrote about above? If so, would they make a database of compositions publically available for other music users (for free or to be licensed)? Whatever the end result is, rest assured that it will take years before the results are visible. You may remember that The Global Repertoire Database was conceived way back in 2010 [2], and remained a concept for over 4 years with very little in the way of actual progress before collapsing in mid-2014 [3].
Works Cited
[1] C. Rae and B. Cashman, “Another Victory for Village People’s Victor Willis,” 23 March 2015. [Online]. Available: https://futureofmusic.org/blog/2015/03/23/another-victory-village-peoples-victor-willis. [Accessed 28 December 2015].
[2] GRD WG, “Common Framework for On-Line Rights Management: Global Repertoire Database Request for Proposals,” 30 July 2010. [Online]. [Accessed 28 December 2015].
[3] C. Cooke, “PRS confirms Global Repertoire Database “cannot” move forward, pledges to find “alternative ways” — See more at: http://www.completemusicupdate.com/article/prs-confirms-global-repertoire-database-cannot-move-forward-pledges-to-find-alternative-ways/#sthash.aOhAamxL.dpuf," 10 July 2014. [Online]. Available: http://www.completemusicupdate.com/article/prs-confirms-global-repertoire-database-cannot-move-forward-pledges-to-find-alternative-ways/. [Accessed 28 December 2015].
[4] D. Lowery, “Spotify’s Failure to License My Songs in US Illustrates Rethink Music’s Call For Transparency,” 20 July 2015. [Online]. Available: http://thetrichordist.com/2015/07/20/spotifys-failure-to-license-my-songs-in-us-illustrates-rethink-musics-call-for-transparency/. [Accessed 25 December 2014].
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