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Spotify Vs. NMPA On CRB Appeal

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NEW YORK (CelebrityAccess) — Music streamer Spotify has responded to criticism it received after it, alongside Google, Pandora, and Apple, announced plans to independently appeal a rate ruling by the U.S. Copyright Royalty Board.

Under the terms of the ruling, payouts to songwriters from streaming services to songwriters and publishers would rise to 15.1 percent of revenue by 2022, up from 10.5 percent, an increase of 44%.

In their joint statement on Thursday, the streaming services said: “The Copyright Royalty Board (CRB), in a split decision, recently issued the U.S. mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB’s decision harms both music licensees and copyright owners. Accordingly, we are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision.”

Unsurprisingly, the reaction from stakeholders in the rights-holder community was swift. After news broke that the streamers were appealing the ruling, David Israelite, CEO of the National Music Publisher’s Association, issued a statement to Variety where he stated: “When the Music Modernization Act became law, there was hope it signaled a new day of improved relations between digital music services and songwriters. That hope was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one-third.”

“No amount of insincere and hollow public relations gestures such as throwing parties or buying billboards of congratulations or naming songwriters ‘geniuses’ can hide the fact that these big tech bullies do not respect or value the songwriters who make their businesses possible,” he added.

According to the blog post Spotify published on Monday, Spotify clarified that they were “not suing songwriters” and is only appealing the ruling by the CRB.

The company also stated that it was supportive of the US effective rates rising to 15% between now and 2022, but qualified that support by questioning the scope of publishing rights. Spotify claimed that CRB’s 15% rate doesn’t account for all these rights, and does not consider the cost of rights for additional material such as videos and lyrics.

“The CRB rate structure is complex and there were significant flaws in how it was set. A key area of focus in our appeal will be the fact that the CRB’s decision makes it very difficult for music services to offer “bundles” of music and non-music offerings. This will hurt consumers who will lose access to them. These bundles are key to attracting first-time music subscribers so we can keep growing the revenue pie for everyone,” Spotify said.

The NMPA quickly responded to Spotify’s post, characterizing the streaming service’s claims as outright falsehoods in many cases. As the NMPA notes, Section 115 of the subject and scope of copyright only applies to making and distributing phonorecords, digital or otherwise.

The NMPA also takes issue with Spotify’s concerns that the new rates will make it difficult to offer bundles to its customers.

“Let’s be straight about how Spotify (and Amazon) want “bundles” to work. Say that Spotify wants to partner with a non-music service, like a gym. You join the gym, and pay $50 every month, and you get Spotify for “free”, something that would cost $10 a month if you paid for it alone. Let’s also say the rate stays at the 15% of revenue. For a music service alone, Spotify would owe the songwriters/publishers 15% x $10 which would equal $1.50. Simple, right? So if the $10 Spotify service is “bundled” with a $50 a month gym membership, and the rate is 15%, how much should Spotify pay the songwriters/publishers? Under the CRB ruling, Spotify would have to value the music service at $10 per month, and still owe $1.50. That’s what Spotify calls “flawed,” the NMPA said.

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