Why Spotify’s Royalty War Is a Giant Industry Distraction

Is Spotify really the biggest problem the music industry has right now?

Spotify is constantly berated for paying meager royalties, or, not paying them at all.  Over the past few months, Spotify has been embroiled in a massive battle over unpaid mechanical royalties, with a $200 million class action sparking a major war between songwriters, publishers, and streaming services.

But that war may be distracting the industry from a far bigger problem: billions of hours of unlicensed, user-generated content that remains largely unrecognized and unpaid.

It’s not that Spotify shouldn’t pay the royalties it owes under the law.  It’s just that Spotify’s war obscures the large percentage of music that remains totally unlicensed, particularly UGC, or user-generated content.  Indeed, two of the most important music platforms today — SoundCloud and YouTube — are overflowing with remixed, or ‘derivative,’ content, with only a tiny portion of it actually licensed properly.

Spotify, meanwhile, is one of the highest-paying streaming music platforms, though it’s catalog can’t ingest remixed or UGC content at all because of licensing restrictions.  This is a serious problem for Spotify executives and investors, especially with competitors like SoundCloud trumping Spotify’s user totals and eclipsing their catalog selection.  Spotify simply can’t compete when it comes to UGC.

That is hardly an understatement: the most important song format is now shifting away from the original, studio-created version to the remixed, mashed-up, altered, or otherwise derivative version.  That’s a major shift in the way we interact with music, and it’s a shift that’s already happened.  In fact, YouTube recently noted that ‘mix music’ was its most searched-for category, across all video categories.

Meanwhile, YouTube commands as much as 52% of marketshare of all music streams, according to research estimates shared with DMN.  That dominance is largely predicated on the availability of nearly every song recorded, with SoundCloud enjoying nearly every remix created (at least those that aren’t getting torn down).

And here’s the problem with all of this: the highest-paying streaming platforms have the highest percentage of licensed, legitimate content, but the lowest total catalogs overall.  That means that the war over content licensing is happening

(a) on the platforms that pay the most (relative to other streaming services); and

(b) on the platforms that have the greatest amount of legitimately licensed content.

“The dam has burst…”

Beyond the YouTube and SoundCloud whales, a number of similarly-oriented sites are ushering the real music revolution, one predicated on total fan participation, not to mention endless re-interpretations of original, first-run songs.  Indeed, platforms like MixCloud and Beatport have enjoyed meteoric rises (and huge valuations) based on UGC and remixed content, and that doesn’t even include a ballooning surge in podcasting.  “The dam has burst,” producer Mark Ronson relayed during his heavily watched TED talk.  “We live in the post-sampling era, we take things we love and build on them.”

That surge is creating billions of hours in totally unlicensed hours of music, with overlapping rights completely unaccounted for and unpaid.  This has been acknowledged by massive rights owners like Warner Music Group, who according to sources, are committing nearly 35 staffers to handle YouTube accounts alone, including ContentID disputes and complaints.

Sony Music Entertainment, which remains a holdout on SoundCloud licensing, is managing a similar quandary.

All of that raises the scary reality that the existing licensing infrastructure is totally inadequate and unprepared to handle this massive cultural shift.  Indeed, the ‘system’ can barely handle existing licenses around original content, which is now coming to the fore with the Spotify imbroglio.

One company attempting to solve this mess is Dubset Media Holdings, a derivatives rights licensing specialist.  Just this morning, Dubset Media kicked off a major relationship with Apple Music, a huge start to addressing this issue.  According to the deal terms, Apple will begin to ingest cleared, remixed content, with every sample track and artist capturing their sliver of the royalty pie.

Dubset Media, a DMN partner, envisions a better-licensed marketplace, and has constructed a rights exchange called MixBank that will power the Apple deal.  MixBank includes a registry for content owners, as well as a realtime scanning and clearance component, to enable quick licensing of remixed works.

The MixBank platform could eventually involve the participation of virtually all rights owners, including individual artists and songwriters, whose works can eventually be recognized and remunerated by platforms like SoundCloud.  “This is a very important day for the music industry,” Dubset Media CEO Stephen White told Digital Music News, speaking on the Apple deal.  “Until now the major music services could not offer DJ mixes and unofficial remix content in their services.”

Tiesto, one of the largest DJs on the planet, also chimed in.  “Delivering remix content to Apple Music through Dubset Media is an amazing development,” Tiesto relayed.  “Dance music fans are the biggest winners here because they will now have access to great remixes on the same platform that they listen to our original tracks.”

A similar deal could dramatically change Spotify as well.  But mega-players like YouTube and SoundCloud could also actually pay for the remixed content they offer, while pulling down content that simply isn’t authorized.  In essence, a digital marketplace that can easily license everything — original or derivative — could potentially rain billions in additional annual revenues, while further marginalizing the revenue drain from piracy.

It could also have serious implications for YouTube, whose ContentID is largely predicated on original works, but has difficulty picking apart the oftentimes multi-layered mixes of different tracks.  And this is where none of this makes sense: somehow, YouTube gets away with lackadaisical licensing or straight-up infringement that amounts to billions in unlicensed content, while Spotify gets excoriated for unpaid licenses that amounts to damages in the millions.  Perhaps the Apple Music deal is one small step towards leveling that imbalance.

8 Responses

  1. DarkMoney

    – Department of Keepin’ It Real –
    I took a look at today’s Billboard 100 and ran each song through Youtube’s “what if I use this song” database (www.youtube.com/music_policies).

    1. Work – Rihanna: “Viewable everywhere except Germany”
    2. Love Yourself – Bieber: “Viewable everywhere except Germany”
    3. Stressed Out – twenty one pilots: “Viewable worldwide”
    4. My House – Flo Rida: “Viewable worldwide”
    5. 7 Years – Lukas Graham: “Viewable everywhere except 2 countries” (Germany, Sweden)
    6. PILLOWTALK – ZAYN: “Blocked in 98 countries” (but NOT the USA or Canada)
    7. Me, Myself & I – G-Eazy x Bebe Rexha: “Viewable everywhere except 20 countries” (Germany, many Middle Eastern countries)
    8. Sorry – Justin Bieber: “Viewable everywhere except Germany”
    9. Cake By The Ocean – DNCE: “This song is not available for use in your YouTube videos. If you use this song, your video may be blocked or muted.”
    10. I Took A Pill In Ibiza (SeeB Remix) – Mike Posner: “Viewable everywhere except Germany”

    1. So with 9 out of the top 10 songs, for viewers in the US, the *copyright owners* have opted in to monetization via YouTube and ContentID.
    2. YouTube Germany users, sucks to be you.

    • JTV Digital

      The ‘not available in Germany’ issue is just caused by the endless conflict between YouTube and GEMA.
      Videos going through VEVO are viewable with no isssues in Germany though.

  2. Dude

    no way to stop music piracy. the digital age is here. the artists before year 2000 should be glad they made money when people actually bought CD’s

    • Versus

      Proper and consistent enforcement and fines would severely curtail piracy, and collect money to compensate the losses of creators.

  3. Remi Swierczek

    Google with YouTube and other activities and policies is the biggest CANCER of music industry. Google is also the SINGLE & ONLY entity which can without government action (change of fair use act) create new game board and deliver $200B music business!

    All inclusive streaming which also applies to YouTube KILLS any logical music monetization. All streaming “bars” above DO NOT make even .5% of music hours delivered by conventional Radio, not on demand Panora or satellite Radio, TV and public places playing music!!!!!

    Those 4 entities listed above + few music and lyric ID services like Shazam PREVENT monetization of 99.5% of music entering human ears!!!!

    WE MUST START THE HARVEST OF $200B OF MUSIC AROUND US instead draining it thru streaming tubes to $20B advertising and subscription MANURE TANK!

  4. Versus


    So: Why isn’t the music industry going after leeches like Youtube and its ilk more intensely then?

  5. None Of Your Business

    Mixbank doesn’t work, not for mixes at least, as all of the very few of it’s members will tell you.