Amazon Caves To Independent Publishers

It’s been no secret that Amazon has been working on their streaming service and plans to launch in less than 2 months. Most speculate that their streaming service will be bundled together with Amazon Prime, which currently goes for $99 a year and includes 2 day shipping, Prime Instant Video and Kindle Owners’ Lending Library.

There was just one problem. Independent publishers refused to sign their contract. The president of one of the largest independent publishing companies in the world told Digital Music News this past April upon reading Amazon’s Music Publishing Rights Agreement:  “this is entirely unacceptable.”

Amazon was trying to bypass Section 115 of the US Copyright Act and create its own mechanical royalty rate – well below the rate set by congress, and the rate all of the other streaming services are abiding by.

Amazon tried to muscle its way into the streaming game like it muscles its way into everything else. They tried to lowball the independent publishers with a “take it or leave it” deal. A deal that limited their liability to $50,000. A deal that forced publishers to rip down music from ALL other streaming services if they removed it from Amazon. A deal that allowed Amazon to change the mechanical royalty rates at any time without renegotiating with the publishers.

Well, the independent publishers did their songwriters right by refusing to sign this completely unfair contract. Amazon must have realized that music lovers want to hear more music than just 6 month old major label hits.

As of May 27th, 2014, Amazon has begun to send out notices of intentions to obtain compulsory mechanical licenses.

2014 will be the year of streaming. With Spotify announcing last month it has signed up 10 million paying subscribers, Apple purchasing Beats (to likely launch its streaming service very soon), and digital downloads already down 12.5% in the first quarter of this year, everyone is trying to jump head first into streaming.

Your move, iTunes.

56 Responses

  1. Anonymous

    “2014 will be the year of streaming”

    Well, that depends on YouTube Music.

    Nobody knows Beats or Spotify. And I don’t know why any artist would touch Amazon.

    • Anonymous

      Did you miss the part that said 10 million spotify subscribers?

      • GGG

        Anonymous doesn’t care about anyone, fan or artist, unless we’re talking about the top .1% of successful acts.

        • Anonymous

          “Anonymous doesn’t care about anyone, fan or artist, unless we’re talking about the top .1% of successful acts”

          On the contrary: Only the major labels benefit from the company you keep defending.

          • GGG

            False. Financially is there issue/room to grow? Of course. But since you don’t deal with small acts, you have no idea what you’re talking about. Spotify/streaming in general can be an incredible discovery tool. I know this first hand because it actually affects me and the artists I work with.

            If you think any substantial number of people buy music that Pitchfork gives like a 7.5 or something, you’re incredibly naive. People with Spotify Spotify it. People without it go on whatever service they use, or go on YouTube. You know, the site that pays less than Spotify.

          • Anonymous

            ” YouTube. You know, the site that pays less than Spotify”

            …per click.

            Don’t get me wrong, Spotify would be extremely interesting if it had 1.2 billion unique users/month like YouTube.

            But that’s not the way things are going — especially not with the arrival of YouTube Music.

            Unless it backfires of course, then we’re back at square one.

          • GGG

            That’s all that matters when we’re talking about initial discovery. If I hear about an album/band/song and I’m interested enough to search wherever for their music, I want their music, not previews, not interviews with the band, not any of that shit you constantly say YT is better for. I’ve never disagreed that the video component makes YT a better service. But when I want to hear MUSIC, I go to Spotify over YT 99 times out of 100. Because also, despite your constant rant that Spotify has no new music, I find 99% of what I look for on there.

          • Anonymous

            “I hear […] I’m interested […] I want […] I’ve never […] I want […] I go […] I find […] I look”

            🙂 You use yourself as an example quite a lot.

            But you’re not the average consumer — not by a long shot — and he just doesn’t know Spotify.

            He knows YouTube though, because his cousin sometimes sends him a funny link and then one thing leads to another…

            Again, I’ve no idea if YouTube’s going to f*** it up this summer, for instance by forcing YouTube artists to use Google Play or something, but numbers show it’s THE platform right now.

          • GGG

            I’ll ask this question again, assuming you’ll just dodge it for about the 5th time. But why does it matter if Spotify exists if YT exists, but pays less? Your argument makes no sense. You have this ridiculous assumption that people who listen to Spotify don’t ever pay for music (probably largely true) but at the same time, YT, which is the better service, gets more clicks yet everyone still goes out and buys DLs or CDs? How can you make this argument so many times without seeing how stupid it is?

            You and Fareplay and whoever else has this bizarre idea that 1000 Spotify plays means 1000 people who were going to buy an album but decided not to, and that 1000 YT plays is 1000 people checking out the single just to double check they’re right in that they are buying the music. You can’t have both these things. If someone has a favorite place to stream, they are going to mostly stream. End of story. So again, I ask you. If you have no problem with YT, why in the world does it matter if Spotify exists or not?

          • Anonymous

            “You and Fareplay and whoever else has this bizarre idea that 1000 Spotify plays means 1000 people who were going to buy an album”

            Please stop quoting your opponents for opinions we don’t have, if you want this discussion to go on.

            I’ve never suggested that the ratio would be 1-1.

            I think it’s about 1-10. Or 1-15. I’m sure you have a gut feeling you trust, too. But the point is that Spotify would be a bad idea even if the ratio were 1-139.

            And again; I would be happy to use Spotify if it were big enough to pay what YouTube pays, if it could go viral, and if it had video.

            Why wouldn’t I?

            Spotify’s ‘stream-and-you’ll-never-buy-a-song-again’-slogan is disgusting and their ‘stream-or-the-pirates-are-coming-to-get-you-‘threats are even worse.

            But nothing beats Google in the abuse department, and I’ll leave them in a heartbeat if anything else comes along.

            Even Spotify With Video — which, funnily enough, was a phrase billboard or some other site recently used about YouTube Music.

          • GGG

            Dodge number 6. Answer the question. Per click, more often than not, Spotify pays more than YT. So why does it matter if they both exist? So YT is bigger and can get you more money overall (in theory). Great! Spotify can ALSO make you pennies. So what’s the problem here?

            That’s like saying you shouldn’t bother selling vinyl because you want everyone to buy digital DLs.

          • FarePlay

            GGG. We’ve had this discussion on several occasions before and ironically it is one of the things where we both agree on.

            No way 1,000 plays would EVER equate to 1,000 sales, not even close. Whether it’s Pirate Bay or Napster, i mean Spotify. I keep getting those guys mixed up. Any thoughts on that?

            But I will say between YouTube and Amazon dropping their pants, ooops, the justice departments interest in Pandora’s streaming rates and the Beastie Boys bringing down the hammer on Monster, It was one hell-of a week.

          • GGG

            You just continue to baffle me. Google/YT screw artists more on payouts, they just have volume. Did you see that article back in 2006?

      • Anonymous

        “10 million spotify subscribers”

        And that’s why their business model failed — they would need a billion.

        • TuneHunter

          You got it right!
          At $5, which would be MAX AVG. RATE if you have to be in Nigeria or Pakistan, one billion makes $60B

          1999 CD revenue with just inflation adjustment equals $56B – so Mr. Ek is far from proven business model, I am afraid is is not in business but paid by investors DEMOLITION activity.

  2. JB

    Something tells me Ari cited the wrong Section of the Copyright Act. it should be Section 114 as opposed to 115.

    • Ari Herstand

      Section 114 of the US Copyright Act deals with sound recordings. Section 115 deals with compositions and mechanical licenses.

      Mechanical royalties are only earned from compositions (not sound recordings).

      Every song has two copyrights: the sound recording and the composition. Sound recordings are owned by the rights owners (label or artist) and compositions are owned by songwriters and publishers.

      You can read about Section 115 of the US Copyright Act here and click through to read the set compulsory mechanical royalty rates.

      • well

        well, streaming does not pay mechanical royalties.. Mechanical royalties get paid when CD or any physical format or mp3 is sold not for streaming.

        • Ari Herstand

          Incorrect. Streaming does pay mechanical royalties.

          • Sequenz_

            That depends on the territory. There are places where streaming is considered 100% public performance.

  3. Paul Resnikoff

    Amazing to see the giants lumbering into this game. As clumsy as Amazon, Google and Apple are, they win if Spotify doesn’t IPO, get acquired, or miraculously figure out a business model.

    • tippysdemise

      They have the business model – Spotify just needs more subscribers.

      • Anonymous

        Yes, they need a billion like iTunes — and that will never, ever happen.

        • tippysdemise

          1/20th of that amount would do just fine.

          • Anonymous

            They’ve spent years reaching 10m — 50 is impossible.

          • But

            Look at the growth in the last year alone, and the jump in streaming in general…and all the other major players getting into the game now.

            It will potentially move exponentially.

          • Anonymous

            Again, this discussion doesn’t make sense right now — YT Music will change everything very soon unless Google screws up the indie issue.

            Apple could compete but doesn’t seem motivated; Spotify is history (doesn’t have video), and nobody really wants to touch Amazon…

        • smg77

          It doesn’t help that sites like this one along with some luddite musicians keep spreading FUD about Spotify keeping it from growing as fast as it could.

      • Paul Resnikoff

        That’s a giant assumption. Remember, the streaming companies have massive variable costs, and the distinct possibility of a massive pullout if heavy demands aren’t met. Spotify belongs to the majors, don’t forget that.

        Now, take me to 50 million? OK, I’m listening. But right now, this is a patient hemorrhaging gallons of blood.

        If I’m Goldman Sachs, I’m pushing really hard for an IPO or huge purchase. And I’m furious that Apple bought Beats.

  4. David Maldonado

    It’s taking too long to get to the streaming age… I’m tired of all these downloads!

    • Hoodgrown

      The one thing that nobody mentions about streaming is that songs and artist routinely get pulled with no explanation as to why.

      While I like streaming and enjoy having access to a lot of songs, I don’t like when I go into a playlist and find out that songs I’ve added are no longer there.

      This is why I’ll continue to do both… OWN songs that no one can take away from me.. and stream for when i’m on the go.

  5. TuneHunter

    Not a fair play!

    Amazon wants competitive advantage in STUPID ALL INCLUSIVE STREAMING at the expense of creators.

    Hey, Amazon have some balls and show LABELS and GOOGLE how to make real cash on music!
    Discovery loaded streaming and ads around FREE are the biggest RETARDANTS of music industry.

    A lot of investment and brainpower goes to converting $100B of music and $45B of Radio to $30B of ASHES!

    • TuneHunter

      Why we all work overtime to PLEASE the freeloaders?

      Let’s concentrate on delivery method that would TEASE them out of MONEY.
      Pleasure and happiness on both sides!

      The Music Game Board is ruled by 5 guys at labels & RIAA and 7 guys at Google, Apple, Amazon & Spotify.
      Those 12 apostles have to meet and change self destructive CHAOS to $100B MUSIC MONEY MACHINE

      • john

        enough with the same rant, some weird trolls around here.

        • hippydog

          many have tried to stop him, some have even tried to engage him (maybe in the hopes that if he gets it all out it will stop)..
          but nope..
          he’s relentless..

          Its at the point i think most of us just think of him as the kid that rides the short-bus (you know, the one that has to wear the helmet to school)

  6. Pat

    While I believe that Spotify has the superior service, I think iTunes/Beats or whatever it’s going to be called will win out. The business timing of the apple/beats deal totally took advantage of Spotify bringing streaming to the masses and acclimating US music listeners to a standalone streaming service (this excludes youtube as youtube has more than just music). Spotify has huge debt, yes now they have the subscribers, but they still have huge debt and very low artist payouts. Amazon will exist because people who already have Prime will get their new service and use it, but it will be like the k-mart of streaming. Beats/iTunes has a subscription only model, and from what I understand it has better artist payouts. But, the main reason it will win is because of the Apple brand it now has behind it. Apple loyalists and people new to the streaming world (generally older folks, the late adopters) will flock to this service. Beats took advantage of Spotify getting everyone used to streaming, and as much as I love Spotify, I just don’t see them lasting too much longer with their looming debt on the books.

    • Anonymous

      “The business timing of the apple/beats deal totally took advantage of Spotify bringing streaming to the masses and acclimating US music listeners to a standalone streaming service (this excludes youtube as youtube has more than just music)”

      That’s a peculiar statement. YouTube is the world’s most popular site today with 1 billion unique users every month — and YouTube Music will obviously be music videos only.

      And Spotify is going to disappear because:

      1) It’s business model just didn’t work. Spotify has existed for years and it’s still losing money.
      2) The future is video, but Spotify is audio-only.
      3) Spotify songs can’t go viral.
      4) Spotify is a museum because more and more artists use other platforms for release.

      • Anonymous

        …and that should read: YouTube is the world’s most popular music site today…

        • TuneHUnter

          Yes, it is, with approximately just one billion dollars transferred to music industry last year.

      • hippydog

        Quote “2) The future is video, but Spotify is audio-only”

        I wish video was the future.. As it would make sense (for multiple reasons I wont get into, but it is the better platform, even for the people that wouldnt be watching the videos)

        but alas, neither the artists, nor the consumer, nor the labels , are pushing for it.. (but they should be)

        • Versus

          Why should video be the future? Video has its place, but most of the time many are happy to listen to music without video, which can often be just a distraction from the music.

          • Anonymous

            All significant songs released since August 1981 consist of two parts — audio and video.

            Both are equally important today. YouTube’s dominating position proves that. Fans don’t want crippled audio-only versions anymore. They want the full package.

            Spotify’s only chance of survival is to stop living in the past and give modern consumers what they want.

          • Joe Mamma

            …if there were money to be made, if consumers were actual paying customers at some point… THEN they will get what they want. All the freeloaders complain that this or that incredibly expensive thing isn’t available. this is because the artists spent their last dime recording that album and put the last penny in the van. If you want video, encourage your friends to support the arts…

          • Anonymous

            “if there were money to be made”

            Oh, but there is!

            Music is absolutely crucial to people. History shows they are willling to pay for it — if they can’t steal it without consequences.

            So let’s focus on that.

        • Anonymous

          “neither the artists, nor the consumer, nor the labels , are pushing for it [video]“

          I disagree.

          Artists and labels definitely want fans to watch their (incredibly expensive) videos.

          And YouTube is the world’s leading music platform today because consumers do want the full package — the complete work of art — as opposed to dumbed-down audio-only versions.

          I even think Spotify might have a chance if it adds video. That would be an interesting development, wouldn’t it? Competition is always good. And YouTube doesn’t have any.

  7. grunt

    none of us know shit about what WILL happen.

    Apple loyalists and people new to the streaming world (generally older folks, the late adopters) will flock to this service.

    Absurdly naive pov. People in their 50s are more likely to buy expensive toys (new) and spend money on tech. I’ve got 5 kids. Only one has anywhere near the money to afford the new devices and such … esp those with kids. DAD bought all the nice toys AFTER the kids left home.

    • FarePlay

      I let my Amazon Prime lapse a year ago and I must say I miss the service. Why? I was walking around a book store a couple of years ago, enjoying being there, hanging out and figuring out what I was going to go home and order from Amazon.
      Then it dawned on me. I like book stores. I like going there. I like looking at hard cover books. And I realized, if I didn’t buy at least some of my stuff there they’d be gone. Well a year ago they closed, I was too late. Now there’s an LA Fitness and Burger Fi where the book store used to be.

      So here’s my world view. If you like some brick and mortar place, throw ’em a bone every once in a while. It may keep them open and your neighbor employed. Unless you live in Seattle. Nice city, but the highest suicide rate in the country. I guess people stay inside too much with all that rain.

  8. Long Tail

    It seems The Long Tail (changing consumer culture from focusing on big hits to selling less of more, Amazon’s business model) turned out a disappointment for indie culture. What first looked as something the sector had been waiting for now gives way to autocratic behaviour of Amazon and the likes.