Spotify Can’t Pay an Artist. But They Can Pay 6 Different Lobbying Firms…

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Pandora has a gaggle of attorneys and lobbyists camping out at Capitol Hill, all pressing for lowering royalty obligations.  Now, Spotify is getting into the same game.

According to details just leaked by DC insider Politico, Spotify is now retaining the services for four high-priced lobbying firms: Forbes-Tate, Peck Madigan Jones, Gibson Group and BakerHostetler.

That complements an additional two lobbying firms employed by Spotify in Europe, according to the report.

But why, exactly? And why now?  Pandora’s entire business model hinges on government-mandated royalty rates and regulations, and major publishers are battling to undo age-old laws that limit their royalties.  Spotify not only has an online radio feature, but its on-demand streaming service also involves a range of royalty payouts, including mechanical licenses.  Beyond that, Spotify pays 70+ percent of all of its revenues to recording labels and content owners through open market negotiations, something it might be trying to change.

Then, there’s Apple, which is about to drop Beats onto Spotify’s head, and thousands of exclusives with it.

EU regulators are already examining Apple’s market power in this space, and the potentially unfair advantage.  That includes a bundled Beats, which could crowd out Spotify on iOS decks and steer artists away from Spotify, fair or otherwise.

Back in the US, Apple spent more than $4.1 million on Capitol Hill lobbying last year, and that’s just what we can see above the table.  Apple currently employs six separate lobbying firms: Bernstein Strategy Group, Capitol Tax Partners, Fierce Government Relations, Franklin Square Group, Glover Park Group and Wilmer Cutler Pickering Hale and Dorr.


55 Responses

  1. Anonymous

    What a load of crap. Spotify can’t pay artists because that isn’t how their licenses work. End of story.

    As far as lobbying, nearly every major company hires lobbyists. That includes major labels. Is Spotify not allowed to play dirty too?

    • Spotify = Evil

      Wow. Lobbyists aren’t cheap. It’s expensive to cheat artists out of fair royalty payments! Wow, just wow.

      • realist

        ^ you really don’t understand how any of this works, do you?

        • idealist

          Just cuz it works this way dont make it right. Why not at least imagine a system that is fair to everyone?

          • "Reality" Is Down Rounding...

            Reality is that Spotify is “down rounding” on the current investment (google that term). It means investors are losing confidence because the likelihood of it becoming financially viable is getting farther away.

            Spotify can’t turn a profit and can’t pay artists fairly… that pretty much just looks like simple math for a BAD BUSINESS MODEL THAT DOES NOT WORK.

            Welcome to REALITY.

            “INVESTOPEDIA EXPLAINS ‘Down Round’
            Down rounds cause dilution of ownership for existing investors. This often means the company’s founders stock or options are worth much less, or even nothing at all. Unfortunately, sometimes the only other option is going out of business. In this case down rounds are necessary and welcomed.

            Down rounds are commonplace when a red hot economy turns bad. A perfect example was the dot-com crash of 2000-2001.”

        • Down to earth guy7

          I would say he knows exactly how it works.

      • 17hertz

        they pay according to the formula.. change the royalties, dont blame spotify

      • Yura Muron

        Go buy Tidal and feed and clothe a celebrity for DOUBLE THE PRICE at half the effort of spotify. Artists write music, get paid, and then go on tour, and get paid. They show up to club openings, and get paid, and then do commercials and invest in new products and get paid. If musicians want to see more of their money, then all they have to do is live a bit more modestly. I think there is a group of really powerful musicians out there who would have you believe they are the victim, these people are completely out of touch with their audience, and the world at large.

        • Wow

          You REALLY don’t understand how the music industry works, if you think artists are just living beyond their means.

        • Gina

          someone who obviously doesn’t work as a songwriter would say this.

        • Seriously

          Yura Muron? you obviously have no clue on how the music industry works. There are more people involved in the industry who aren’t the stars. Producers, Engineers, and songwriters get paid off of royalties as well. They all have to provide for families and put food on the table like everyone else. Not everyone who happens to be in the music industry is rich and famous.

  2. Anonymous

    And? Apple has been clear about wanting to pay out even less than Spotify for their streaming service, and they spend even more on lobbying.

    Hold up, maybe that is a correlation.

    • Anonymous

      Thats why Jay-Z told Jimmy Iovine that Apple Music was a losing proposition for him….

  3. Edward Jennings

    Spotify used the venture capital money to purchase influence, sheesh who can’t figure that out.

    Meanwhile Alicia Keys, stakeholder in TIDAL HiFi is honored in Washington DC by the First Lady of our Country and many other Washington congressional people last night. Can’t get better influence than that for far less money and far greater value. Grammys on the Hill does not include Spotify

    What I want to know is what is “platform neutrality” that Spotify is asking their lobbying companies to establish with Washington????

    • Me2

      “Neutrality” had at one point a specific concept. Now it seems to be a card for enterprises not actually operating in a “neutral” way.

      Whatever gets them the most immunity and least responsibility i suppose.

      • FarePlay

        Spotify, or rather Goldman Sachs and other investors, are very concerned about their investments and dreams of turning what they believe is a social hub into something BIG.

        One of the stories that didn’t appear in DMN was a survey taken by Apple, a small survey of 1,000 Apple customers, where 20% said they would pay for Apple’s Music service. This means Apple could triple the number of PAID subs that Spotify has by Labor Day 2015.

        Spotify could be over even before Goldman Sachs can even put together an IPO.

        • Me2

          I think the Apple thing is going to be big.

          I remember there were some interesting news items about Apple patents, something like P2P where a license key comes from their servers. Not sure if these will be implemented for the current launch, but it indicates Apple thinking moves ahead.

          • GGG

            I think the concept of ‘radio’ is just something people don’t really care about. Pandora’s been around long enough and to some people the idea of the genome aspect makes it “better.” Not to mention, if you open your iTunes, it’s probably to listen to stuff you already have and know you like, as opposed to a random radio station.

            I don’t think that failure has any bearing on how well their streaming service will (or won’t) do.

          • Radio

            I like streaming radio formats because I don’t always want to listen to just one artist, and don’t really care to spend a lot of time crafting playlists. Most of the time I want to pick an artist or genre and hear random tracks. If I don’t like a song, I skip it. What’s good for the music industry is I’ve actually discovered artists I wasn’t familiar with that way, and bought their albums as a result.

            But it’s hard to dispute (unless you’re working for the labels) that artists are under-compensated. It’s one thing when you look at a relatively small circuit band that gets only modest airplay and see that they’re struggling financially because of onerous contracts, but there are some pretty established acts, who have won Grammys and are in regular rotation, but are just clearly not getting the residual checks they should be entitled to.

        • Name2

          Like “Music Choice”? It’s a shitty, less-than-middlebrow service with shitty sound deserving of the company it keeps (i.e. cable companies).

          But I wish them luck. Because I’m paying for it even though I don’t want it: the ultimate music business nirvana.

    • Edward Jennings

      Platform Neutrality is HUGE. Spotify is thinking and acting long term.

  4. Jeff Robinson

    *cough* Spotify pays mechanicals? Since when? No artist on our label has ever received Mechanicals from Spotify. *cough*

    • GGG

      Not from interactive streams, just from the radio aspect. So if you started a “Jeff Robinson Radio” they are supposed to be paying mechanicals from those streams. Though, I’m not sure if they count starting your own station or they have to pop up on another artist’s station.

      • Anonymous

        Are you sure you don’t have that backwards? I have never heard of a radio service paying mechanical royalties. I have never seen it mentioned in Pandora’s SEC filings either. But I know I have heard that on-demand services like Rhapsody pay them. I assume Spotify would as well.

    • JTVDigital

      Every stream generates mechanical and performance royalties, on top of the master use royalties (the revenue you receive as a content owner / label).

    • Jamie Armstrong

      Jeff, mechanicals are royalties paid to the publisher for the reproduction of a song. Why would your label receive mechanicals? If you and your artists owned the publishing then yes, you would receive mechanicals through your publishing company.

      As a label, you would receive a different type of payment via SoundExchange.

      GGG, mechanicals are paid only on interactive streaming (Pandora pays performance royalties not mechanical).

  5. Anonymous

    hey where’s the copyright notice on the Spacey photo?

    You are licensing it from the copyright owner right?

    • Bandit

      Also Right of Publicity…..not sure if he is pro or anti Spotify lobbying politicians

    • Bandit

      and if we follow recent copyright infringement court decisions (Blurred Lines) that photo infringes on an older photo. I’m thinking of the photo of Pete Towshend on the cover of RS years and years ago

  6. Jeez

    They do pay Jeff. Don’t know if your label has to go through an aggregator or you deal direct but if your label’s tracks are streamed you should get royalties. The per stream/play paradigm is a lil misunderstood. When I was a kid and bought a 7″, I paid once and played the track thousands of times and none of this was factored into royalties. There was only a mech/repro right no communication/ performance . A stream nessistates the exploitation of both rights increasing the potential for song writer earnings. I still have vinyl form 20 years ago I play today. No one is receiving royalties from these plays. I’m optimistic for the potential of these services in generating royalties for artists and writers…..
    BTW Love the click through ad half way through the article…

  7. Anonymous

    I am quite tired of hearing this moaning about Spotify being Evil to artists. If you are not happy with the payment remove your catalogue from Spotify and sell CD’s and mp3s only. Moaning about Spotify unfair payments via comments is not gonna change a thing. Rather than moaning here, go and write a song about it. You never now it might become viral hit.

    • ST

      Artists don’t always have a say in that, as if you’re signed to a label, it’s up to them. Our label has a holdback window, but it still appears on there in the end, whether we like it or not. We’d prefer not to be on Spotify, but it’s not a dealbreaker. It’s just one of the many compromises involved in managing a record deal.

  8. Tony Gottlieb

    If the music community can’t even unite to make certain that legacy acts (and by proxy musical compositions) aren’t compensated uniformly (Pre-1972s) in digital broadcast, what Politician is going stand up to the Broadcast lobby?

    The music industry is becoming a gaggle of narcissistic whiner babies with no self respect.

    Maybe it always was?

  9. Bandit

    I’m surprised it has taken Spotify this long to realize how business works in DC

    • Fareplay

      Spotify doesn’t get it. That’s why Goldman’s Spotify account manger is taking over and they’re bringing in the big guns before their investment disappears.

  10. Rah

    Fuck Spotify and every cunt minion supporting them!
    Have a nice weekend!

  11. FarePlay

    Did anyone catch Goldman’s earning reports yesterday? The had a $2 B quarter. Analyst attribute it to an aggressive / risky investment portfolio. Most of the other large investment houses have backed off since the housing collapse, not GS.

    Apparently, Goldman was emboldened by their ability to influence the white house. The only thing saving us? Spotify wants to get into it with Apple and in this battle my bets on Apple, even with Goldman at their backs.

  12. iconoclast

    Spotify can spend all the money they want on lobbyists, but they can’t protect themselves from their own sadistic arrogance towards their users and their own website design incompetence. Since April of 2014, they’ve been reducing useful features, establishing limits on the number of favorites, making their website less and less navigable, and playing fast-and-loose with their users’ playlist collections. All of this has been happening despite a vocal opposition of thousands of members expressing their dissatisfaction with these actions on the users’ forum. Spotify has been behaving lately like an autistic child with an expensive toy in his hands, and the toy is inevitably bound to be shattered beyond repair.

  13. Wooly

    Like it or not, this makes sense from a business standpoint. Without the necessary firepower from lobbyists they are sunk.

  14. Name2

    Food companies also hire lobbyists. If Spotify upsets you, I urge an across-the-board boycott ASAP.

  15. Chet

    Is anyone surprised by this? With shady companies like pandora & spotify lining pockets of even shadier politicians, why should any of them care about broke artists?

  16. Kimberly Williams

    My husband and daughter are in the music industry, these fine sensitive, talented not to mention VERY HARDWORKING souls get paid dirt, less then minim wage to do what they love and they are a signed well know band #1 on reverb nation (Papermoon Gypsys). It makes me sick to see how this big money corporations steal, lie and cheat from these artists that hone their craft with blood, sweat and love!!!

  17. Nova the Camilion

    I’m an artist that had 3.7 million streams and I never received one penny for the streams. My digital distribution company said Spotify made them remove all my content because of an term called “streaming abuse”. I have real proof all of the major distribution companies do this to independent artist pull the right out of the stores under the radar and keep their revenue without a word reaching the public. It’s illegal to do what they are doing now but after they pay to get laws in place independent music is over. If you can help me get my story out there or know of an attorney willing store take on a case of this magnitude please email novathecamillion@ gmail. Com thank youb

  18. Angelo

    You know what actually surprised me? Artists who have released a cd, a vinyl and he’s on iTunes as well, they decide to promote their iTunes songs or the cd release instead of the vinyl album which can actually pay him & his hole crew good! Odd isn’t it???

  19. Anonymous

    Most of the crap above seems staged… Like a f$&@”)! Correction fucking Infomercial of “artists” complaining that someone listened to their music a whole lot of times!! Are you fucking kidding me Isn’t that the the fucking point?? You want fame, put it on utube. There, Ellen might see you.. If you want money, work for it. As for the company’s and their lobbyist, fuck them too it’s bullshit why on earth would you cock-block your bread and butter?

  20. oh dear

    Spotify pay 70% of their revenue to musicians/labels quite the tin-foil hat nonsense. what they spend their 30% on is their business.

  21. J writer

    I have a song on spotify that was recorded by a successful country artist. It was streamed on there 98,633 times last quarter. I made right at 4 bucks. Beyond my means? T
    hat would make a happy meal beyond my means.

  22. MusicCreator.

    Spotify should made to close down if it can’t pay its suppliers – the music creators. Why should the music creators subsidise these parasites who are trying to lessen the royalties of their suppliers even further?

    Creators never told them to set up in business without evaluating the risks, nor told them to do secret deals with these greedy *gangster* labels and publishers in the first place. Pay up or shut down the shop!