This is why Apple says Spotify is suing songwriters


Earlier today, Apple hit back in a press release against Spotify's EU antitrust complaint and said that Spotify "wants all the benefits of a free app without being free." The statement contains the expected refutations against Spotify & # 39; s claims about how Apple uses the App Store to boost Apple Music, but there's something interesting at the bottom: a joke against Spotify that has nothing to do with the EU fight .

"Only this week," Apple says, "Spotify has sued music makers after a decision by the US Copyright Royalty Board (CRB) demanded that Spotify increase its royalty payments." This rule is, of course, intended to cast Spotify as a bad overall actor and Apple as a friend of artists to be defended. It is not a bad tactic, because artists and Spotify have had a close relationship for a long time. But the truth is of course a little more complicated than that.

The idea that Spotify is suing songwriters comes from David Israelite, CEO of the National Music Publisher & # 39; s Association (NMPA), who referred Spotify & # 39; s appeal to the copyrighted process of Copyright Royalty Board to an "embarrassing decision" in a Variety article last week.

"When the Music Modernization Act became law, there was hope that it marked a new day of improved relationships between digital music services and songwriters," Israelite said in a statement. "That hope was extinguished today when Spotify and Amazon decided to sue songwriters in a shameful attempt to reduce their payments by nearly a third."

But like The edge has pointed out that none of these companies actually sues songwriters, and it is not entirely clear that they are actually trying to lower overall rates. Instead, they move on to the next phase of an interest rate fixing process that has been around for three years.

The US Copyright Royalty Board, or CRB, is a panel of three administrative judges appointed by the Library of Congress. Every few years, the CRB is required by US law to pay and revise rates for mechanical royalties. This is a payment to songwriters and publishers when a copy of their song is purchased or streamed. This includes individual copies, such as vinyl or digital downloads, but also "ephemeral copies" – the temporary copies of songs that create interactive streaming services such as Spotify that enable on-demand streaming services.

none of these companies actually sues songwriters

What appeals to companies such as Spotify and Amazon is the most recent decision of the CRB on mechanical royalty rates. This decision increases the rates step by step from the current 10.5 percent to 15.1 percent over a five-year period from 2018 to 2022, making this the largest interest rate increase granted in CRB history. The decision was formally made public a few weeks ago, with the clock being started in a 30-day window in which appeals can be made.

Spotify, Pandora, Google and Amazon first submitted a request for a CRB rehearsal in 2018 (a request to the jury members to review the decision), usually requesting clarification for various terms that the companies felt were too ambiguous (such as the difference between "Limited offer" and "Limited downloads"). In response, the judges said that there was no reason to repeat, but agreed to discuss some of the issues raised, which were then published in an order.

It seems that Spotify, Pandora, Google and Amazon are not completely satisfied with the compromises outlined in this document, and so they have benefited from the 30-day professional screen to get different judges to look at the requests they make.

Apple Music is covered by the rates that are set

In a blog post, Spotify says it supports the rate increase, but searches for the parameters of which specific content falls below that speed to be better defined.

"We support the US effective rates between now and 2022 to 15%, provided that they cover the correct scope of publication rights," the message reads. "But the CRB's 15% rate does not take into account all of these rights. For example, it does not take into account the cost of rights for videos & song lyrics." Spotify claims that everyone is on the same page when it comes to more money for songwriters, but that the CRB process has yielded something too broad. "We are willing to increase the royalties of songwriters," says Spotify, "provided that the license covers the correct scope of publishing rights." The NMPA says that Spotify eventually asks for lower rates, because things like lyrics and music videos have nothing to do with the CRB process for setting the rates. It's a fight.

it was expected that these platforms would take the opportunity to maintain their bottom line through a call

But it's still not "Spotify suing songwriters." Suing requires the initiation of legal proceedings against someone or something, and the assessment by the CRB and the resulting decision is not initiated by anyone. It is an administrative court with judges who are legally obliged to meet and review these rates every few years. Now that it has made a decision and the repeat motion has been rejected, Spotify and these other streaming services are appealing in the Court of Appeals, the only available next step in the process.

It is probably this action – moving the process from the CRB to the Court of Appeals – causing the NMPA to use the word & # 39; suing & # 39; has used, but the only thing that really happens is that the assessors are changing and these streaming services are asking for a different look with the changes they requested in the CRB ruling. As entertainment lawyer Jeff Becker from Swanson, Martin & Bell said The edge last week it was anticipated for a long time that these platforms would take the opportunity to keep their bottom line through a call – it is the obvious next step in a billions-stake process.

Apple has a platform that Spotify doesn't really trust, but Spotify has a platform that millions of artists don't really trust either

Importantly, Apple Music will be covered by whatever decision and fees at the end of this process – so while Apple can lean back and approach Spotify for the appeal, it will benefit from any ruling that favors Spotify, Amazon and Google. – which is not a bad position to be in.

So why is Apple bringing this up? Probably because Spotify has actually filed a lawsuit against Apple this week. It filed an antitrust complaint with European Union regulators, claiming that Apple's 30% discount on subscriptions via the App Store is unfair and harmful to consumers.

While the two fight it out, Apple has an easy chance to hit back on Spotify & # 39; s decision to appeal to the CRB, where emotions are already running high. It has nothing to do with Spotify's lawsuit against Apple, but it is a reminder that while Apple is running a platform that Spotify doesn't really trust, Spotify has a platform that millions of artists don't really trust either.