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Amazon’s Streaming Contract Is “Entirely Unacceptable”

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After speaking with the president of one of the largest independent publishing companies in the world, who has 20+ years of experience in the field (who wants to remain anonymous because of NDA agreements), his takeaway from Amazon’s Music Publishing Rights Agreement was “this is entirely unacceptable.”

Digital Music News published the contract in full earlier this week.

This publisher who I spoke to, let’s call him Joe Pub, explained that Amazon is trying to bypass Section 115 of the US Copyright Act and define its own royalty rates.

Amazon is trying to bypass US Copyright law and define its own royalty rates

Section 115 of the US Copyright Act is the rate, set by the government, that defines the mechanical royalty rates. Most people know that the statutory mechanical royalty rate is currently 9.1 cents per download or physical “phonorecord” under 5 minutes (and then 1.75 cents per minute thereafter), but few know what the rate is per stream. That’s because the streaming rate is based upon the streaming service’s number of subscribers and users. More subscribers to the service equals higher mechanical royalty rates.

For the record, Spotify, Beats and the other streaming services all follow Section 115 of the US Copyright Act and follow the defined mechanical royalty rates.

You can read what the (government-set) streaming mechanical royalty rates are here.

Once a publisher signs off on this agreement, Amazon can set their own rates AND CHANGE THEM AT ANY TIME without renegotiating with the publisher. Amazon is trying to pull an iTunes-esque user agreement with publishing rights. Big no no.

Joe Pub told me that he has been staring at the contract on his desk for the past two weeks “grumbling about it.” He doesn’t think any of his other independent publisher friends are going to sign this either.

Amazon also included a clause that forbids the publisher from removing their songs from Amazon if they keep them up on any of the other streaming services (like Spotify, Google Play or Beats).

Meaning, Amazon could say “actually remember that 21% we promised you for mechanical royalties – naw we meant 2.1%. Take it or leave it! But if you leave, you MUST leave ALL the other streaming services as well. Or we’ll sue you.”

If a publisher removes their catalog from Amazon, but leaves it up on the other streaming services, Amazon could theoretically sue this publisher for as much as they want. BUT the publisher may only sue Amazon for a maximum of $50,000.

Yup! Amazon snuck in a Limitation of Liability clause of $50,000.

And from what I hear, the distribution/label agreement is just as shady. Don’t expect Amazon to launch their streaming service any time soon. And if they do, it most likely will not contain the catalogs of most independent publishers, labels and artists.

Thanks, but no thanks, Amazon.

-

Thanks to Entertainment Attorney Sarah Abelson for helping me to interpret the contract! 

Photo is by kennethkonica from Flickr used with the Creative Commons License.

Ari Herstand is a Los Angeles based singer/songwriter and the creator of Ari’s Take. Listen to his new album on Spotify or download on BandCamp. Follow him on Twitter: @aristake

 

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Comments (17)
  1. TuneHunter

    Why smart Amazon follows the lost and blinded by advertising and subscription science crowd?

    Dear Mr. Bezos,
    Both US and Europe is percolating major legislative revisions to “fair use” and media/internet interlock.
    Let’s get all mega stars and their government connections and lobby Google blind man out of insanity zone.
    Just slight changes to “fair use” doctrine will allow to convert all music ID services to mandatory cash registers of the industry.
    Few more steps done by currently starving participants will allow for conversion of all Radio, (including Pandora and XM) all current streamers and few million web sites to music merchants.

    Discovery moment monetization will bring 100 billion dollar industry by 2020. Unfortunately, Google advertising monk with current positioning has a chance to control at least 30% of new pie.


    Reply
    1. TuneHunter

      …and Amazon can be the wholesaler of coded tunes to everyone: Radio, Streamers, Mc Donald, “best tune of my site” etc., etc. – chance to control 40% of new 100B jackpot
      All pay out info to creators and delivery participants in in the code – delivered by Amazon on monthly basis.

      No more music content for lost YT, sorry no interest in music dwarf land!

      Video games, smaller in 1999 than music, will top 100B next year. Music should be there in 2020.


      Reply
      1. Ted

        Who’s pockets is it you expect the 100bn to come from? People the moment that they discover a song- you think thats the moment to hit them with a charge?


        Reply
        1. TuneHunter

          Everyones pockets.

          You like the tune, you want to live it again you got to pay!

          Whoever presented that tune to you for the first time and lit the fire will take part of the cash that was extracted from your pocket. All, I mean absolutely all: Spotify, Radio, Pandora, XM, McDonald, Nordstrom and my local Winking Lizard! It is simple and long overdue for implementation. Why starve – let’s be happy! HAPPY!


          Reply
  2. RealistiC

    PhuCK AmaZon

    We ( musicians and artists ) need to grow some balls and start BOYCOTTS!!!!!!!!!! These are the same assholes who wanna fill the sky with an army of product dropping drones. WE are the musicians and Artists. WE define cool. We should smother and starve these corpoRATe bitches from the market…… B4 they do it to US…..


    Reply
    1. smg77

      Yes, bury your head in the sand and hope that people decide they want to go back to getting ripped off for $18 CDs.


      Reply
  3. HunterTune

    that dude is bleeding out his mouth


    Reply
    1. TuneHunter

      I have a clear vision for 100B dollar music industry – call me if you want it.

      I simple walking on earth common business person.

      I never seen in my life self-destruction on such grand scale!


      Reply
  4. JR

    This is not about streaming, it is not about sales, it is about staking a claim in digital asset management.

    Amazon is too smart to get into the one small slice of a business when they can grab it all. Amazon, Google are the players that will be left standing in the end, the question is who will their partners be?


    Reply
  5. headsaintready

    This is a terrible article. It’s biased and poorly researched. Sadly, DMN has become a sensationalist “e-rag”. I’m not an Amazon defender by any means, I just really hate seeing people peddle bullshit. Also, in the future, you might want to consult an attorney with a bit more experience to “interpret” a contract.

    Here are my favorite gems from this article:

    “…Meaning, Amazon could say ‘actually remember that 21% we promised you for mechanical royalties – naw we meant 2.1%. Take it or leave it! But if you leave, you MUST leave ALL the other streaming services as well. Or we’ll sue you.'” — THIS IS A COMPLETELY INACCURATE READING OF THE RELEVANT PROVISION OF THE CONTRACT. IF SOMEONE ELSE (OTHER THAN THE AUTHOR OF THIS CRAPPY ARTICLE) READ THE PROVISION AND THIS WAS HIS/HER INTERPRETATION, THEY COMPLETELY MISREAD IT.

    The spirit of the provision in question (paragraph 3(c) of the agreement) is meant to prevent a publisher (mainly, a publisher with a massive catalog), from arbitrarily threatening to withdraw their catalog and using that threat to extract a higher royalty rate or other more favorable terms.

    “You can read what the (government-set) streaming mechanical royalty rates are here.” – This links to one page from the CFR that addresses royalty rates for “secondary transmission by satellite carriers,” which are not applicable to Amazon’s service.

    “Amazon is trying to bypass Section 115 of the US Copyright Act and define its own royalty rates.” – Amazon isn’t trying to do anything nefarious. All of the terms are clearly spelled out in the agreement. Parties can enter into direct agreements and set their own rates. Amazon is not obligated to utilize compulsory licenses and the associated rates (nor is any other licensor).

    “For the record, Spotify, Beats and the other streaming services all follow Section 115 of the US Copyright Act and follow the defined mechanical royalty rates.” And? It’s a business decision whether to enter into direct agreements or take advantage of compulsory licensing statutes.

    It should be pointed out that:

    *The contract contains a “most favored nations” provision. If you feel your getting a crappy deal, you can rest easy knowing that everyone else is.
    *Either party may terminate the agreement on 90 days’ notice prior to the end of the current contract period (and, yes, you can leave your catalog up on other services if you do terminate).

    At the end of the day, if you don’t like the proposed deal, then don’t take it and quit whining.


    Reply
    1. hippydog

      Quote “All of the terms are clearly spelled out in the agreement. Parties can enter into direct agreements and set their own rates.”

      ok.. Can you cite where it says that exactly?
      mainly I messed the part where it says artists can set the rate..
      thx


      Reply
  6. LeeGibsonMusicDOTcom

    If it pays less than Spotify & Pandora it would be obscene. As an independent artist, receiving those royalty checks from our Performing Rights Orgs(PROs) is a beautiful thing to see in your mailbox/inbox. However, these new online subscription services are killing the indie artist/writer. It’s bad enough major market radio is dead to anyone but the same 25 artists whose labels coerce the Program Directors into playing the same 25 songs day in & day out but when the little guy keeps getting screwed eventually there will be no little guy. Sadly, the greed of a few outweighs the needs of many.


    Reply
  7. Anonymous

    STREAMING IS THE DEVIL!!!!


    Reply
    1. TuneHunter

      I think streaming is brilliant and only way to go.
      As we stream we have to monetize at the DISCOVERY MOMENT.

      You like it? Wow! So you want to live it again? Nice, we will take your 39 cents

      Shazam ! time to become CERBERUS.

      I mean real CERBERUS! Not wimp with nice icons on iPhone giving away the goods.


      Reply
  8. Steve

    The crap music most hear on the airwaves today, for the most part, IS worthless.
    I mean, a McDonald’s jingle is more artistic than 90@ of the musical “artists” getting airplay.
    They don’t even bother with words in the choruses anymore…it’s all LaLaLa…ever since, say, Para, Para, Para, Paradise.
    The whole culture is pretty much worthless.
    Time for a total reset.


    Reply
  9. Andrea

    I do have concerns about this contract. But I don’t see how the clause that says your have to remove your work from all streaming services if you withdraw the license from Amazon leads to them being able to change the royalty rate. As a matter of fact, you can NOT withdraw the contract unless you “no longer have the right to license the Musical Work . . .” AND you also remove it from all other streams. I also wonder why the article doesn’t mention 3.(b), which says, “In our discretion, we may elect not to avail ourselves of the license you grant in this paragraph 3. . . and instead obtain those rights from the applicable performance rights organizations. . . Should we elect [to do that]. . . no royalties will be due you. . .” So they are asking us to grant a license, but they may not honor the license, instead going elsewhere to gain the right to use the work.


    Reply

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