No Victory For Spotify Over Royalties

Spotify removed the catalog of Victory Records from its service Oct. 19 because of a dispute over publishing royalties and in the wake of a damning report indicating streaming services typically fail to pay songwriter royalties on as many as 10 percent to 20 percent of listens.

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Rock On The Range, Crew Stadium, Columbus, Ohio

The dispute between Spotify and Victory is over publishing royalties that Victory’s publishing company, another Victory Music Publishing, says it is owed by the streaming services, according to the Wall Street Journal. Another Victory says Audiam Inc., a tech company that seeks to recover unpaid royalties, determined that the publisher hasn’t been paid by Spotify for compositions of thousands of recordings that U.S-based Spotify users have listened to millions of times in recent years.

“Spotify has pulled down the Victory Records sound recordings in response to us asking them to pay for the 53 million streams that have not yet been paid on,” Audiam CEO Jeff Price told the WSJ. The paper reports a Spotify spokesman responded that Another Victory and Audiam had not provided sufficient data to back the royalty claims. “Given that we don’t have that information, we felt we had no choice but to temporarily take down their content until we can come to a resolution,” spokesman Jonathan Price told the Journal via email. Victory, according to the earlier report by the Journal, represented “well under 1 percent of Spotify streaming in the U.S. last year.”

However, the song “Out of Time,” by Victory artist A Day to Remember, streamed more than 708,000 times in 10 months during 2014 but received no songwriter royalties from Spotify.

Audiam claims that Victory artists were paid such royalties only about 70 percent of the time. Estimates of unpaid royalties by Spotify and similar services such as YouTube and Google All Access run from $40 million to $75 million.

The services claim the amount is much less, though everyone apparently agrees the system of tracking and paying for streams played is inadequate. “We want to pay every penny, but we need to know who to pay,” a Spotify spokesman emailed the WSJ. Price told the paper that he believes the streaming services regularly fail to pay royalties on 15-20 percent of listens by his clients, which include Bob DylanRed Hot Chili Peppers and Metallica.

“The problem isn’t that they’re not setting aside the money, or that they don’t want to pay the money,” Price said. “The problem is they don’t know who wrote the song, or how to find the person to pay them.”

The issue, in part, stems from the complex structure and multiple types of royalties involved in music sales and streaming. While sales royalties are divvied up by record labels to artists, a smaller sliver of mechanical royalties are owed by the record company to the songwriter or publisher of the songs recorded. The label owes the writer/publisher roughly 10 cents per recorded copy created.

And when a song is streamed by a service like Spotify or Pandora, the service itself is supposed to pay the mechanical royalty, which is about 10 percent – or roughly .04 of a cent per stream – of the royalty that would be payable to the record company for the sound recording. Another part of the problem is that record companies don’t generally include songwriter and publishing information in the metadata included with songs when they are uploaded to the services.