Earlier today, Apple hit back against Spotify’s EU antitrust complaint in a press release, saying Spotify “wants all the benefits of a free app without being free.” The statement features the expected rebuttals to Spotify’s claims about how Apple uses the App Store to boost Apple Music, but there’s something interesting at the bottom: a jab against Spotify that is completely unrelated to the EU fight.
“Just this week,” the Apple release reads, “Spotify sued music creators after a decision by the US Copyright Royalty Board (CRB) required Spotify to increase its royalty payments.” This line is obviously intended to cast Spotify as a bad overall actor, and Apple as a friend of artists that should be defended. It’s not a bad tactic, since artists and Spotify have long had a testy relationship. But the truth is, of course, a little more complicated than that.
The idea that Spotify is suing songwriters comes from David Israelite, CEO of the National Music Publisher’s Association (NMPA), who referred to Spotify’s appeal of the Copyright Royalty Board rate-setting process as a “shameful decision” in a Variety article last week.
“When the Music Modernization Act became law, there was hope it signaled a new day of improved relations between digital music services and songwriters,” Israelite said in a statement. “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.”
But as The Verge has pointed out, none of these companies are actually suing songwriters, and it’s not totally clear that they’re actually seeking to reduce overall rates. Instead, they are moving on to the next stage of a rate-setting process that has already gone on for three years.
The US Copyright Royalty Board, or CRB, is a panel of three administrative law judges who are appointed by the Library of Congress. Every few years the CRB is mandated by US law to meet and review rates for mechanical royalties, which is a payment given to songwriters and publishers whenever a copy of their song is purchased or streamed. This includes individual copies, like vinyl or digital downloads, but also “ephemeral copies” — the temporary copies of songs interactive streaming services like Spotify create that enable on-demand streaming services to work.
What companies like Spotify and Amazon are appealing is the CRB’s most recent decision about mechanical royalty rates. This decision would incrementally raise rates from the current 10.5 percent to 15.1 percent over a five-year period from 2018 to 2022, making it the biggest rate increase granted in CRB history. The decision was formally made public a couple weeks ago, starting the clock on a 30-day window in which appeals can be made.
Spotify, Pandora, Google, and Amazon first filed for a CRB rehearing in 2018 (a request for the judges to look at the decision again), mostly to request clarification for several terms the companies felt were too ambiguous (such as the difference between “Limited Offerings” and “Limited Downloads”). In response, the judges said there was no case for granting a rehearing, but did agree to address some of the issues that were brought up, which was then published in an order.
It looks like Spotify, Pandora, Google, and Amazon aren’t entirely happy with the compromises outlined in this document, and so they took advantage of the 30-day appeal window in order to have different judges look at the requests they are making.
In a blog post, Spotify says it supports the rate increase, but is seeking for the parameters of what specific content falls under that rate to be better defined.
“We are supportive of US effective rates rising to 15% between now and 2022 provided they cover the right scope of publishing rights,” the post reads. “But the CRB’s 15% rate doesn’t account for all these rights. For example, it doesn’t consider the cost of rights for videos and lyrics.” Spotify claims everyone is on the same page when it comes to more money for songwriters, but that the CRB process resulted in something too broad. “We are willing to support an increase in songwriter royalties,” Spotify says, “provided the license encompasses the right scope of publishing rights.” For its part, the NMPA says Spotify is still ultimately asking for lower rates, since things like lyrics and music videos have nothing to do with the CRB rate-setting process. It’s a fight.
But it’s still not “Spotify suing songwriters.” Suing requires initiating a legal proceeding against someone or something, and the CRB’s review and resulting decision wasn’t initiated by anyone. It is an administrative court with judges that are mandated by law to meet and review these rates every few years. Now that it has a decision, and the motion for rehearing was denied, Spotify and these other streaming services are appealing in the Court of Appeals, which is the only available next step in the process.
It’s likely that it’s this action — moving the process from the CRB to the Court of Appeals — that caused the NMPA to use the word “suing,” but all that’s really happening is the judges are changing and these streaming services are asking for another look at the adjustments they requested in the CRB’s ruling. As entertainment lawyer Jeff Becker of Swanson, Martin & Bell told The Verge last week, it was anticipated for some time that these platforms would take the opportunity to preserve their bottom line via an appeal — it is the obvious next step in a process with billions at stake.
Importantly, Apple Music will be covered by whatever decision and rates are set at the end of this process — so while Apple can sit back and take shots at Spotify for the appeal, it will benefit from any ruling that favors Spotify, Amazon, and Google — which is not a bad position to be in.
So why is Apple bringing this up? Likely because Spotify has actually sued Apple this week. It lodged an antitrust complaint with European Union regulators, alleging that the 30 percent cut Apple takes from subscriptions made via the App Store is unfair and harmful to consumers.
While the two duke it out there, Apple is taking an easy opportunity to hit back at Spotify’s decision to appeal the CRB, where emotions are already running high. It doesn’t have anything to do with Spotify’s lawsuit against Apple, but it’s a reminder that while Apple runs a platform Spotify doesn’t really trust, Spotify runs a platform millions of artists don’t really trust either.