US music publishing body the NMPA has never been shy of a fight with digital services if it feels its members aren’t being respected. Spotify has felt its wrath before, and although relations have thawed in recent times, it’s now under fire again.
Why? Bundles.
In the US, music streaming services pay lower mechanical royalty rates when they are part of wider ‘bundles’ of services – rates agreed in 2022 between the publishers and streaming services.
Amazon Prime is one example of a bundle: it includes Amazon Music but also Prime Video, Prime Gaming, free delivery of shopping and more. Apple One is another example of a bundle: it includes Apple Music but also Apple’s video, gaming, fitness, news and cloud storage services.
Spotify has had bundles before – for example one with Hulu a few years ago – but its standalone Premium tier hasn’t traditionally been classified as a bundle. That’s changing, because Spotify Premium now includes audiobooks. The company is thus planning to apply the bundle royalty rates to it for mechanicals.
The NMPA is not happy about that.
“It appears Spotify has returned to attacking the very songwriters who make its business possible,” said CEO David Israelite in a statement sent to Music Ally.
“Spotify’s attempt to radically reduce songwriter payments by reclassifying their music service as an audiobook bundle is a cynical, and potentially unlawful, move that ends our period of relative peace. We will not stand for their perversion of the settlement we agreed upon in 2022 and are looking at all options.”
Spotify has issued its own statement in response to the NMPA’s criticism.
“Spotify is on track to pay publishers and societies more in 2024 than in 2023. 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,” it claimed.
“Multiple DSPs have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent.”
In 2022 when US publishers and streaming services reached their agreement on the next set of streaming royalty rates, all seemed sweetness and light regarding bundles.
“Both sides made concessions so that the services got favorable language on bundles and free trials that allows them to get more subscribers into the ecosystem, while giving the songwriters and publishers a little more in pay,” a DSP source told Billboard for an article later republished on the NMPA’s website.
The important phrase in David Israelite’s statement is “potentially unlawful”. The NMPA will be seeking to prove that Spotify’s reclassification is illegal, and clearly Spotify will be arguing that it is not.
Bundles are a fact of life in the streaming world now, but understanding whether Spotify’s offering of music and audiobooks is the same as Apple and Amazon’s bundles, or definably different to them, is one key aspect of this dispute.
Another is whether reclassifying a non-bundle service as a bundle mid-rates-period is acceptable or not. Settling both those questions will be necessary before the NMPA and Spotify can return to their state of relative peace.
