Music Business

Spotify exits Uruguay after new law requires payments to performer [Chris Castle]

Spotify is pulling out of Uruguay after a new law was passed requiring that featured and nonfeatured performers be compensated by streaming services. In the US and most countries, non-interactive streaming services like Pandora pay performers royalties through SoundExchnage and their global counterparts, while interactive streamers like Spotify do not.

Spotify argues that adding payments to featured and non-featured performers creates an unsustainable business model.

Op-ed by CHRIS CASTLE of Music Tech Policy

You may have heard that Spotify is refusing to deal with featured and nonfeatured performers whose works are performed on streaming services in Uruguay. This story is an important and meaningful companion to the entire artist-centric conversation that is going on around the world as the streaming train wreck grinds to a slow-motion pileup.

Here’s what is actually happening in Uruguay. The national copyright law in Uruguay has been amended to provide a basis for featured and nonfeatured performers to be compensated by streaming services. Spotify says this is “paying twice for the same music.” That is simply not true–for example, streamers don’t pay for the brand value of the artists who they exploit to promote their service and build market capitalization (stock market value) that they don’t share with performers at all, especially nonfeatured performers. This development is just another step in Spotify’s failure to get ahead of the horrendous “market centric” royalty model that has made rich men out of Daniel Ek and his cronies.

Uruguay’s approach has been followed in other countries like Spain and Spotify paid that royalty as Spotify’s senior executives have testified to the UK Digital Culture Media and Sport investigation into music streaming. 

Specifically, in response to questioning by Damian Green, MP, the executive said, “It [i.e., Spain’s streaming remuneration] has not really affected the way that we operate in Spain but it has made it harder for us to have a path to profitability and margin expansion.” Of course, Spotify acknowledged in other testimony that Spotify intentionally kept prices low as a business strategy. ( UK Parliament, Digital, Culture, Media and Sport Committee, Oral Evidence: Economics of Music Streaming (Q599) (Feb. 23, 2021), See also discussion above of whether Spotify is driven by profit or stock market valuation so that “difficulty in making a profit” is not Spotify’s main business concern.)

The legislation at issue in Uruguay in rough translation states:

“ARTICLE 36.- The performer of a literary or musical work has the right to demand remuneration for its interpretation broadcast or retransmitted through radio, television, internet or digital networks of any type, or recorded or printed on disk, film , tape, thread or any other substance, medium or body suitable for sound or visual reproduction. If an agreement is not reached, the Arbitration Court established in article 58 of this law will be resorted to.”

“ARTICLE 39.- “Performing artists, with respect to their power of public communication and making phonograms and audiovisual recordings of musical themes available to the public, generate in all cases the right to fair and equitable remuneration for its exploitation. It is also established that the management entities duly authorized to operate will represent performers, in accordance with the regulations of the Executive Branch, and in accordance with the provisions of article 24 of Law No. 17,616, of January 10, 2003.”

Spotify is the dominant music service in the world, so any time that Spotify refuses to deal with customers (Uruguay subscribers) or suppliers (featured and nonfeatured performers and their CMO) you have to look a little deeper into what their motivation is for this concerted refusal to deal. This is particularly the case since the company acknowledged in a public setting (DCMS inquiry) that they could and had absorbed a similar royalty in other Spanish-language countries. 

Spotify already engages in predatory below-cost pricing which has a direct benefit to its share price–and let’s understand that Spotify is in it for the stock, not for the profit like every Silicon Valley company. When you understand that it’s all about the exit, the company’s droning on about how they can’t make a profit is so much noise. They are purposely gaslighting you into focusing on the wrong ball.

Another part of our business is that companies like Spotify really do not like is CMOs. Spotify likes their artists to be fractionalized, disorganized and poor. That way they can be pushed around and the evidence of Spotify’s and Daniel Ek’s attitude about artists is legion. So when you consider that Spotify’s concerted refusal to deal in Uruguay is ultimately directed to CMOs, the picture starts to be clear. Spotify, after all, was the driving force behind the digital music services setting up The MLC, which is their CMO for music streaming (and Spotify pal Google just bought BMI with New Mountain Capital).

But make no mistake; legislation like Uruguay’s is not against Spotify, it is for fair compensation for performers. This helps the entire music economy and it should be obvious that fairness is breaking out all over when it comes to streaming.

If you want to get the local angle, here’s an interview in Spanish (set the CC to English if you need the translation) with the secretary of the Copyright Council Martha Caviglia to explain why the legislation is not against Spotify:

We’ll come back to this, but here is an informative statement from leading performers organizations and guilds discussing the legislation and encouraging the Uruguay Senate to pass the bill (which has already happened):

Honorable Senators, 

The international organisations AEPO ARTIS (Association of European Organisations of Performers), FILAIE (the Ibero-American Federation of Performers), FIM (International Federation of Musicians) and SCAPR (the Societies’ Council for the Collective Management of Performers’ Rights) support the amendment of articles 36 and 39 of the Law of Copyright and Related Rights of the Oriental Republic of Uruguay by means of the Law of Accountability Law (Ley de Rendición de Cuentas). 

These entities uphold the remuneration right for the making available of phonograms and audiovisual recordings administered through collective management as the only way to guarantee fair remuneration for the use of the music by means of streaming and downloading platforms in favour of performers. 

This mechanism has been implemented in some Latin-American countries (Mexico, Dominican Republic, Panama, and Ecuador), Europe (Spain, Hungary, Belgium, Italy, Netherlands, etc) and Asia (South Korea) for the making available of phonograms or audiovisual recordings and all over the world in respect of the public communication of phonograms.

The undersigned entities work in the Standing Committee on Copyright and Related Rights of the World Intellectual Property Organisation (WIPO) so that the remuneration right is established as the only medium to make the making available right recognised in the 1996 WIPO Performances and Phonograms Treaty (WPPT) effective, as it is foreseen in the 2012 Beijing Treaty on Audiovisual Performances.

Different independent reports commissioned by the WIPO Standing Committee have proved that, under the current system in force since the 40s of the 20th Century, main performers obtain very low payments for the use of their music through streaming and downloading platforms and session musicians or non-featured performers do not obtain any amount

The Group of the countries of Latin America and the Caribbean (GRULAC), such as Uruguay as one of the most active members, leads the works in WIPO to regulate the making available right again and recognize a remuneration right like the one foreseen in the legal amendment passed by the Finance and Budget Committee of the Senate and the undersigned entities trust it to be adopted this week in the plenary vote.

The Honorable Senators of the Republic of Uruguay can be certain that millions of performers represented by AEPO ARTIS, FILAIE, FIM and SCAPR, support the amendment of the Law on Copyright and Related Rights and request, respectfully and firmly, its definitive approval in the Senate.

Spotify’s “take my ball and go home” approach is typical monopolist bullying tactics needs to be evaluated under competition law standards for the refusal to deal that it is.

Share on: