Somebody at Spotify made a huge mistake. And we're not just talking about how laggy the desktop app is. No, this is a financial mistake. Spotify pays between $0.006 to $0.0084 per stream, which is then split between the songwriters and publishers. Recently, the US Copyright Royalty Board’s (CRB) made a decision to rate per stream 44% over the next five years, a ruling that Spotify is trying to appeal. If that wasn't bad enough for the publishers and songwriters, Spotify is now saying they overpaid their royalties last year and need to recoup that money.
Music Business Worldwide reports that there was some under reported "complexity" in the decision, which didn't take into account the streaming service's student and family discounts, the latter of which allows as many as six people to share a $14.99 account. Here's where it gets tricky:
Because of this additional complexity, Spotify has now calculated that, retrospectively, according to the CRB decision, many music publishers actually owe it money for 2018, due to an overpayment based on the prior rates. And guess what? It wants that money back.
Spotify told the publishers the news this week and, as you can imagine, these companies – already up in arms over Spotify’s CRB appeal – are fuming about it.
One senior figure in the music publishing industry told MBW: “Spotify is clawing back millions of dollars from publishers in the US based on the new CRB rates that favor the DSPs, while appealing the [wider CRB decision]. This puts some music publishers in a negative position. It’s unbelievable.”
To be clear, Spotify is planning to simply deduct this "negative balance" from future royalty payouts throughout 2019. A spokesman told Music Business Worldwide:
“Rather than collect the 2018 overpayment immediately, we have offered to extend the recoupment period through the end of 2019 in order to minimize the impact of the adjustment on publishing companies.”
As for how Spotify will pay out on these complex accounts in the future:
The CRB rules that the annual streaming royalty rate in the States between 2018 and 2022 will be determined by the highest outcome across one of three different models: (i) a percentage of a streaming company’s total revenue; (ii) a percentage of what that streaming service pays to record labels each year; and (iii) a flat fee per subscriber in the US.
Within the new CRB-approved regulations for streaming payouts, it says: “A Family Plan shall be treated as 1.5 subscribers per month, prorated in the case of a Family Plan Subscription in effect for only part of a calendar month. A Student Plan shall be treated as 0.50 subscribers per month, prorated in the case of a Student Plan End User who subscribed for only part of a calendar month.”
[via Brooklyn Vegan]