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Spotify payment dispute underlines the “black box” of music royalties

Buzz, accusations, and legal jargon are swirling around the echosphere today in the wake of Spotify’s removal of the Victory Records song catalog from its library.

jeff price canvas

Jeff Price

Victory Records and sister company Another Victory Music Publishing have alleged that Spotify has failed to pay publishing royalties for thousands of recordings. The charges were based on an examination of Spotify’s royalty statements by Audiam, a data and auditing specialist that seeks to recover missing payments, helmed by former TuneCore CEO Jeff Price. The audit covered a period stretching from 2012 to mid-2015. Audiam complained that Spotify had not properly paid songwriter royalties on 53-million song streams.

In response to the allegations, Spotify reportedly reached out to Another Victory with the offer of a direct license, which would replace the compulsory license then in effect. Another Victory Publishing declined, and Spotify has since removed portions of Victory’s catalog in the U.S., although the songs remain available in other markets. A Spotify spokesperson told the Wall street Journal that Audiam’s submitted data were not sufficient to prove claims of underpayment. “Given that we don’t have that information, we felt we had no choice but to temporarily take down their content until we can come to a resolution,” said Jonathan Prince, Spotify’s Global Head of Communications and Public Policy.

RAIN News reached out to Jeff Price, Founder and CEO of Audiam, to ask how systemic such disputes are. In other words, is the music licensing ecosystem so complicated and obscure that conflicts are inevitable? Price indicated that mispayments are widespread, but solvable on a service-by-service basis.

“The problem is the interactive streaming services built no systems to license and pay songwriters,” Jeff Price told us. “They outsourced this to third parties who also cannot do it.”

Price’s statements, both to RAIN and in a widely read digital media listserv, carry an accusatory tone. “Now they have been caught,” he told us, and characterized the interactive streaming music industry as “semi-legitimate.” Price would like services to take more direct control of the complex path that money takes from an end-user’s subscription payment to rights-holders. That path is populated with intermediaries such as Jeff Price’s previous company, TuneCore, which distributes tracks created by musicians and indie labels, then receiving and disbursing royalties at the other end.

In that context, Spotify’s decision to remove Victory Label tracks can be seen as more agnostic than defensive. If payment particulars are outsourced to an agency, there is logic behind taking the content out of Play mode while truth is ferreted out. Jeff Price notes that the claims conversation with Spotify has been in progress since June.

jim griffin

Jim Griffin

“Messy” is the industry buzzword among music licensing industry wonks, to describe the black box of rights ownership which all stakeholders must deal with — streaming services and creators alike. There have been calls for a standardized, global registry of music rights ownership that accounts for all types of performance, and the many stakeholders that can be crowded into a single song. Jim Griffin, a leading expert in media technology and legal policy, gave voice to that call in House testimony this summer. At that time Griffin told RAIN News, “There’s really no market” without such a registry, which ideally would identify all rights-holders for every piece of created and recorded music, each with a global identifier that Griffin compares to the VIN number of a car.

Unless and until such a system is created (which Griffin claimed can be done in a year), royalty “messiness” can cause breakdowns such as the Spotify/Victory dispute, which stops all payment flow and disappoints music fans.

 

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RAIN News Staff

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