The MBW Review offers our take on some of the music biz’s biggest recent goings-on. This time, look at the mounting opposition to Spotify’s mechanical rights settlement in the US market – and the future of Daniel Ek’s streaming company. The MBW Review is supported by FUGA.
Spotify is saving the record business. There really isn’t much of a debate anymore.
According to MBW forecasts, Daniel Ek’s company will generate around $5bn this year and pay over $3bn of it back out to music rights-holders.
It will do so by monetizing less than 1% of the world’s population via subscription – leaving an overwhelming expanse of potential growth for its core business.
Yet the outcome to another question seems slightly less certain right now.
Is Spotify capable of saving itself?
The Swedish streamer just went through two years of anxious negotiations to secure a small reduction in the percentage of revenue it pays record labels.
In the case of Universal, Sony, Warner and Merlin, this is believed to have moved down to 52% from 55%.
The assumed knowledge is that these agreements have sated Wall Street’s demand for Spotify to treat profitability more seriously – and that the company will now merrily steam ahead to a direct listing onto the NYSE.
Yet there are still some choppy waters to navigate for Spotify, which lost the best part of $600m last year.
And that goes for one side of the music business in particular.
Many major songwriters – including Kenny Rogers, Neil Young and the estate of The Doors – have now officially voiced their outrage over Spotify’s inability to identify and pay a tranche of mechanical rights in the US marketplace over the past six years.
In doing so, they have sternly rebuked Spotify’s attempt to buy the silence of those composers affected via a previously announced $43m settlement offer.
Defending its position during a crucial related case in Nashville this month, Spotify made the wild legal argument that it wasn’t even legally obligated to recognize these US ‘reproduction’ rights.
“Songwriters, lest we forget – when the revenue graphs, the sales projections, the A&R bonuses, and the Billboard Power lists have turned to charcoal and ash – remain by far the music business’s most important people.”
The streaming company’s remarks were slammed as “offensive and baseless” by NMPA boss David Israelite, who angrily suggested that such an assertion “spits in the face of every songwriter that has made Spotify’s business even possible”.
Spotify’s anti-mechanical argument has since been dismissed (in its current form) by the judge in the Nashville case – leaving its figurative saliva salvo looking not only a little pointless, but also as a major PR own-goal amongst the songwriting community.
Who, lest we forget – when the revenue graphs, the sales projections, the A&R bonuses, and the Billboard Power lists have turned to charcoal and ash – remain by far the music business’s most important people.
Spotify has long entertained a tense relationship with songwriters – folks who are endlessly thankful for its revolutionary brand of shareable on-demand music, but angered by diminutive streaming royalty checks for even the world’s biggest smash hits.
The deflating share of Spotify’s vast royalty pot that makes its way to songwriters is, of course, not the fault of Daniel Ek’s company.
That blame lies at the door of decades-old copyright structures combined with the smarts of the record labels – who still receive around five times the portion of every $1 paid out by Spotify than their publisher/songwriting brethren.
“In the nine years since Spotify launched, we’ve seen a string of stunning technological feats. Yet try to ascertain who writes Elton John’s lyrics.. and you’ll fail.”
Yet there is another area where, for my mind, Spotify has directly and deeply failed songwriters, and for which there is hardly an excuse: the non-appearance of any credits for composers on its service.
In the nine years since Spotify launched, we’ve seen a string of stunning technological feats – from its ability to serve pinpoint personalized playlists like Discover Weekly to its industry-changing muscle in handpicking, and then breaking, fresh talent to a global audience.s
Yet try to ascertain who writes Elton John’s lyrics, or the momentousness of Holland-Dozier-Holland’s contribution to Motown, or the fingerprints of Max Martin on an array of pop smashes… and you’ll fail.
For all of the brilliant things Spotify has – and continues – to bring to the world of music, this, frankly, remains a shabby source of shame.
There has surely been no better time to fix it.
Spotify is currently at pains to remind the world that it values songwriters to a fanatical degree.
Sadly, its recent, well-intentioned launch of a ‘Secret Genius’ series to celebrate the best composers only draws clanging attention to its very worst oversight.
There is no service on earth that songwriters would rather have place their credentials up in lights than Spotify.
“I’d suggest that ‘Secret Genius’ is like covering a bullet hole with a Band-Aid. But it’s actually worse than that.”
Unfortunately, their genius on the platform remains… well, you’re welcome to smash that punchline out of the park yourself.
I’d usually suggest that ‘Secret Genius’ is like covering a bullet hole with a Band-Aid.
But it’s actually worse than that.
It’s like covering a bullet hole with a Band-Aid… on which you’ve just cheerily doodled some novelty pictures of firearms.
To compound the ridiculousness, Spotify last week held a songwriting camp in London with ‘Secret Genius ambassador’ Wayne Hector.
If you don’t know Hector, he’s the highly respected, Ivor Novello-winning British songsmith who’s penned pop hits for the likes of One Direction, Nicki Minaj, Westlife, Rascal Flatts and JLS.
The event – which also involved UK luminaries such as Charli XCX and Jamie Scott – was a worthy idea designed to recognize a serious talent, devised by Spotify’s European Songwriter Relations team.
But guess what happens when you open the Spotify app and search ‘Wayne Hector’?
You already know.
It’s an embarrassment.
In the coming weeks, Spotify will face heavy fire from US songwriters looking to take their pound of fiscal flesh ahead of the firm’s big entrance onto the NYSE.
Hundreds of writers in New York have just signed an objection to Spotify’s $43m settlement in the missing mechanical royalties case – and the gist of their annoyance is, essentially, that the figure is way too low.
In addition to the aforementioned (The Doors, Kenny Rogers, Neil Young), these names include Stephen Stills, George Benson, Michael McDonald, The Black Keys, Rancid, Travis, Zack De La Rocha / Tom Morello and the estates of both Sonny Bono and John Lee Hooker.
“Spotify can be something great for both music lovers and creators of music. We hope to sit down with them soon and work out something that is mutually beneficial.”
Many of these protestors are signed to Wixen Music, whose founder and CEO Randall Wixen told MBW for this article: “Spotify can be something great for both music lovers and creators of music.
“We hope to sit down with them soon and work out something that is mutually beneficial.”
No doubt in Wixen’s mind, a nine-figure settlement sum would be a start.
But Spotify’s future relationship with songwriters is more important – and actually more valuable – than basic recompense.
In response to angst over its lack of songwriter credits, Spotify may try to inculcate in its critics the idea that the necessary metadata is simply too complicated.
It would have a point: until the music business can successfully work out a single Global Repertoire Database – probably the industry’s greatest modern failing – a comprehensive picture of songwriting’s history will forever seem an impossibility.
Yet not quite having all the requisite metadata hardly stopped Spotify launching in the US in 2011 – where the holes in its mechanical library now threaten to cause it some serious financial damage.
It’s simply a matter of will.
There are 30m+ tracks available on Spotify, of which somewhere around 10%-20% are believed to attract no plays whatsoever.
A commitment to attaching searchable songwriter credits to 5m-10m of the most popular songs is entirely within the capability and technical wizardry of Spotify’s global team.
It would go a very, very long way.
Daniel Ek is expected to become an extremely rich man if Spotify successfully pulls off its imminent IPO/direct listing.
When that time comes, many songwriters may gripe that his riches were built on their backs – and not feel particularly warm towards music tech’s latest billionaire.
Such sour grapes would feel a little unfair on Ek: he did, after all, rescue the recorded music business from the dark ages with little more than a brilliant idea and his headstrong belief – before building a business that continues to outpace behemoths likes Apple, Amazon and Google.
“more than money, Daniel Ek should now be thinking about legacy, and what Spotify’s brand will forever mean in creative circles.”
Yet more than money, Ek should now be thinking about legacy, and what Spotify’s brand will forever mean in creative circles.
Spotify’s commercial team say they have a defining phrase in their minds when concocting global campaigns: ‘Every song has a personal story.’
Well, every story has an author – and to rob them of their due notability at such a pivotal moment in music’s history is an ugly transgression that simply must be reversed.
The MBW Review is supported by FUGA, the high-end technology partner for content owners and distributors. FUGA is the number one choice for some of the largest labels, management companies and distributors worldwide. With a broad array of services, its adaptable and flexible platform has been built, in conjunction with leading music partners, to provide seamless integration and meet rapidly evolving industry requirements. Learn more at www.fuga.comMusic Business Worldwide