Spotify is one of four companies — along with Amazon, Google, and Pandora — appealing the recent Copyright Royalty Board decision to increase songwriter payouts by 44%. While the streaming giant is opposing the new rules, however, it’s also attempting to use them to its financial advantage. According to Music Business Worldwide, Spotify has told publishers the CRB’s math means the service actually overpaid royalties in 2018 — and they want a refund.
The CRB’s new rules establish that the annual streaming royalty rate for the US between 2018 and 2022 is to be set by choosing the highest outcome of three different models. One of those models is based on a flat fee per subscriber in the US, and that’s where things get sticky. Spotify offers different premium plans for families (up to six members on one account) and students. The CBR states that “a Family Plan shall be treated as 1.5 subscribers per month… A Student Plan shall be treated as 0.50 subscribers per month.”
That’s where Spotify said the math got wonky. Now, they’re asking to recoup millions of dollars in payouts from publishers (money that would otherwise go to songwriters) for subscription numbers they themselves failed to take into account. “I find it so hypocritical for a digital service that is appealing the CRB decision to then take advantage of the parts of that decision that benefit it,” said David Israelite, CEO of the National Music Publishers Association, to MBW. “I guess we shouldn’t be surprised.”
In the minds of Spotify execs, the company is at least trying to be reasonable with its refund demand. “Rather than collect the 2018 overpayment immediately, we have offered to extend the recoupment period through the end of 2019 in order to minimize the impact of the adjustment on publishing companies,” the company said in a statement.
In other words, they’re going to deduct the overpayment from the checks they send at the end of the year. Think of it like a reverse Christmas bonus.
We’ve reached out to representatives of Spotify for more information.
No word yet on whether Pandora, Google, or Amazon also did some bad accounting. Apple Music, meanwhile, has stood in support of the new CRB ruling.