A growing controversy regarding the transparency of digital music may have come to a head with the latest situation involving Spotify and indie label Victory Records. The network suspended streaming all of the label’s songs after the digital monitoring company Audiam claimed that Spotify hadn’t paid publishing royalties on 53 million streams from over 2,000 of the label’s songs going back as far as 2012.
Audiam reported that it contacted Spotify and requested payment several times, and that the company agreed to pay but later reneged. Earlier this week, the streaming music company unexpectedly made the label’s songs unavailable to users of the service. Victory or Audiam claimed that they didn’t request that Spotify stop playing the songs, and say they are unsure exactly why the company chose to do so.
Spotify has since offered to terminate the existing license agreement with the label in favor of a new agreement, but the company is said to have declined. Although no official reason was given, it’s reported that the terms were less favorable to Victory.
Digital Royalties Are Complicated
While Victory Records, their publishing arm Another Victory, and Audiam claim that some of the publishing royalties haven’t been paid (the remaining 819 songs in the Victory catalog were fully paid), Spotify has been steadily paying the main sound recording royalty on the many streams from the company.
The fact that it took an outside company to track down unpaid digital royalties illustrates why this area of the business leaves many artists, managers, and even label execs confused and bewildered over the entire process.
Inherently digital music royalties are complicated, with many payment layers that change with the streaming service, tier selected, country and even market share.
It begins with the fact that there are two types of streaming services. The first is a non-interactive or webcast service like Pandora or Slacker where the user listens to a radio-like stream and can’t actively select a song. The second is an interactive service like Spotify or Apple Music where the user can select exactly what they want to play. Each type of service pays at a different rate, which varies from service to service, with non-interactive paying a much lower rate. Read more on Forbes.