Go Public, Go Pugilist: No More Mr. Nice Spotify

March 15, 2019

The war of words over Spotify's recent actions made this no ordinary week for news. Instead of a headline roundup, we asked rock paper scissors' resident music tech expert Tristra Newyear Yeager for her analysis.

 

Going public has changed the tone of Spotify’s interactions with the rest of the music industry, as this week’s news reveals all too clearly. The streaming service is ready to rumble.

 

The first signs came earlier this month, with the “we’re launching in India anyway” move that ticked off Warner Music. Spotify wanted to jump into the market, and they weren’t about to wait for licensing go-ahead, even from one of the major labels they kowtowed to for years.

 

Then came this week’s high-stakes kerfuffles. Spotify joined several others (yeah, I’m looking at you Google, Amazon, and Pandora) in suing to prevent the increased payouts to songwriters that the US music industry pushed for for years. The increases are significant: payments would increase by 44 percent over a four-year term from 2018 to 2022, with a headline rate increase from 10.5 percent of revenue to 15.1 percent of revenue.

 

Unsurprisingly, this did not go over well with songwriter organizations, and the National Music Publishers' Association head David Israelite had choice words for those opposed to changes to the Copyright Royalty Board’s rates. Spotify didn’t sit the next round out, however, as their fellow appealing parties did. They laid out their reasoning. Israelite didn’t buy it, calling Spotify’s explanation of its position “one big lie.” The NMPA countered Spotify point by point in an attempt call the streamer’s alleged bluff.

 

This kind of war of words breaks out somewhat regularly in the space where music and tech collide, but the fervor and willingness to engage stand out, at least to this observer’s mind. Something is shifting, and it began with a direct public offering. Those margins have to expand, or investors are not going to be happy. The pressure is only mounting with every quarter on the Swedish company.

 

Exhibit B: Spotify’s antitrust campaigning against Apple, also in the news this week. Spotify lodged a complaint with EU authorities regarding the so-called “app tax,” the revenue share Apple requires for apps and related purchases in its app store. Their fellow streaming platforms and competitors, including Anghami and Deezer, joined in the chorus and also condemned the rev share.

 

It sucks for them, yes, but is it an issue that requires antitrust measures? Some keen observers would argue yes (even if they are not fully behind the perspective of advocates like Elizabeth Warren that insist on aggressively addressing the seeming tech monopolies). These are folks looking at the issue from the US, and exactly what the EU law demands is an additional point of consideration. (Google may know a thing or two about this.)

 

No matter what, however, Apple’s not having it: a few remarks from near the bottom of Apple’s rejoinder speak for themselves. “Just this week, Spotify sued music creators after a decision by the US Copyright Royalty Board required Spotify to increase its royalty payments. This isn’t just wrong, it represents a real, meaningful and damaging step backwards for the music industry.”

 

Ouch. And this from a company that once barely issued press statements at all.


The snark and fury point to how heated competition is getting in the market for streaming music subscriptions and in the fight to become a profitable streamer. (Though sorry, Spotify: Looks like Napster beat you to it.)

 

 

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The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. The podcast includes news roundups, interviews, and more. Our host is Dmitri Vietze, CEO of PR firm rock paper scissors.

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