Exploration Weekly - Apple Disputes Spotify’s “App Tax” Complaint / NMPA Hits Back at Peloton / Spotify Requests Refund from Publishers

Aaron Davis -

“you can, you should, and if you’re brave enough to start, you will.”

Stephen King, On Writing: A Memoir of the Craft

Earlier this year, Spotify filed an anti-trust complaint with the European Commission over Apple’s “app tax” known as a 30% commission fee. On Monday June 24, Apple then wrote that it only receives revenue from Spotify for 0.5% of its premium user base and for those users, Spotify only pays 15% of revenue, not 30%. Apple’s App Store rules stipulate that subscription services must pay 30% of their revenue from users who sign up for a subscription through an app to Apple in the first year, but that number decreases to 15% in subsequent years.

NMPA disputed Peloton’s counterclaim this week, denying the exercise company’s claims that the music publishers allegedly engaged in anti-competitive behavior by teaming up against the company. Peloton was hit with a copyright infringement lawsuit by over a dozen music publishers in March, stating that the company had willfully infringed over 1,000 copyrighted musical compositions without obtaining a proper license. These compositions include songs by such artists like Rihanna, Bruno Mars, and Lady Gaga.

And Spotify is requesting a refund from music publishers after it claims that it overpaid them in 2018 using the new, higher rates determined by the US Copyright Royalty Board. However, a spokesperson from the streaming service stated that rather than collecting the 2018 overpayment immediately, the company has offered to “extend the recoupment period through the end of 2019 in order to minimize the impact of the adjustment on publishing companies.” There is no exact number of how much had been overpaid, and the three major music publishing companies did not immediately respond to a request for comment.

Our team at Exploration also recently wrote a new guide around consent decrees - what they are, how they work, and what interested parties can do to help be a part of the consent decree review process. Read more here for the full guide!

Now, the details...
Compiled by Heidi Seo

Exploration Weekly - June 28, 2019

Apple Reports Spotify Pays App Store Fees on Less Than 1% of Users

Spotify filed an anti-trust complaint with the European Commission earlier this year over Apple’s controversial “app tax” known as a 30% commission which Apple charges third-party app developers on first-year sales made through the App Store. However, in a new filing with the European Commission on Monday June 24, Apple wrote that it only receives revenue from Spotify for 0.5% of its premium user base and for those users, Spotify only pays 15% of revenue, not 30%. Further to the filing, Spotify does not pay 30% of revenue on any subscriptions to Apple and noted Spotify acquired those users - 680,000 customers - between 2014 and 2016. The company has also not been paid by Spotify for any customers the streaming service has acquired in the last three years. Apple’s App Store rules stipulate that subscription services must pay 30% of their revenue from users who sign up for a subscription through an app to Apple in the first year, but that number decreases to 15% in subsequent years. The streaming service allowed users to sign up directly through its iOS app from 2014 through 2016, which is why Apple isn’t collecting any revenue from Spotify for new customers it acquired since that time.

NMPA Disputes Peloton’s Counterclaim in Copyright Infringement Lawsuit

Back in March, over a dozen music publishers alleged that exercise company Peloton had willfully infringed their copyrights by using over 1,000 copyrighted musical compositions without obtaining the necessary sync licenses. A month later, Peloton responded by filing a counterclaim against the publishers, alleging that they had engaged in anti-competitive behavior by teaming up against the company, and further adding that the National Music Publishers’ Association (NMPA) was involved in “tortious interference” that prevented Peloton from making deals with the individual publishers. On Monday June 24, the publishers filed a motion to dismiss Peloton’s counterclaim, alleging that it fails to establish either collusion on the part of the publishers or interference on the part of the NMPA and should therefore “be dismissed in their entirety with prejudice.” Music allegedly used without permission by Peloton includes songs by such artists as Rihanna, Bruno Mars, Lady Gaga, and Katy Perry.

Spotify Declares Overpayment to Publishers in 2018, Requests Refund

Spotify stated that it overpaid publishers in 2018 using the new, higher rates determined by the US Copyright Royalty Board, a decision that Spotify, Amazon, Google, and SiriusXM/Pandora appealed back in March this year. The company now requests a refund. “While the appeal of the CRB decision is pending, the rates set by the CRB are current law, and we will abide by them — not only for 2018, but also for future years in which the amount paid to publishers is set to increase significantly,” said a Spotify spokesperson, “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.” There is no information as to how much had been overpaid. And the three major music publishing companies did not immediately respond to a request for comment. Spotify has been spending the past two years courting by appealing the CRB rate hike, which would see streaming payments rise by 44% or more over the next four years.

What are Music Industry Consent Decrees?

Our guide on music industry consent decrees is now live on the website! These agreements imposed by the US Department of Justice (DOJ) on ASCAP and BMI play an integral role in the performance sector of the music industry. In 2016, the DOJ underwent a review of the consent decrees and announced that they would not modify them. However, a “full work” licensing requirement was instituted, meaning that any entity controlling part of the composition must offer a license for the whole of the composition. Currently, the DOJ is undergoing another review period, which means they are accepting public comments from interested parties. Songwriters may not be a direct party to consent decrees, but they do influence the way their work is used and the rates that are set for the use of their work. Songwriters, publishers, licensees, and other music industry stakeholders are called to submit any information or comments relevant to the consent decrees via email to ATR.MEP.Information@usdoj.gov. The comment period ends on July 10, 2019.

House Judiciary Hearing on Copyright Office Discusses Black Box Royalty Concerns

Distributions from black box royalties will not occur before 2023, says register of copyrights Karyn Temple this past Wednesday during the House Judiciary Committee hearing on the Copyright Office. Temple was seeking to clear up misunderstandings around new laws concerning black box royalties. Those are monies due to songwriters and publishers where digital music services, and the companies they hire to help process such payments, are unable to match compositions to recordings, either due to poor or inadequate metadata or a lack of registration by DIY indie artists and songwriters with the Copyright Office. In addition, Temple said both applicants hoping to form the MLC have said they will wait until receiving the 2023 data before considering a royalty disbursement, which according to the law must happen once a year. Other issues were discussed during the hearing, like whether the ASCAP and BMI consent decrees should be modernized, and what impact the CASE Act will have when it is passed in creating a copyright small claims court.

YouTube Music Automatically Downloads 500 Suggested Songs for Offline Consumption

YouTube Music now offers an Offline Mixtape feature, which enables users to stream 100 songs when they are not connected to the Internet. In addition, a new tool called “smart downloads,” when manually enabled, will automatically download 500 songs that subscribers can access regardless of their online status. According to The Verge, these 500 algorithmically-derived songs will include the Offline Mixtape as well as other tunes based on “liked” videos and other favorited playlists and albums. Downloads occur at night when a phone is connected to Wi-Fi, and users are able to set a limit as to how many songs will be downloaded. YouTube Music Premium subscribers, on the other hand, can manually download as many songs as they would like for offline consumption. Currently, Google Play Music and YouTube Music count a total of 15 million paying subscribers together. One YouTube Music Premium subscription is priced at $10 per month.

Apple Music Announces Over 60 Million Subscribers Worldwide

According to an announcement made this past Thursday by Apple’s SVP of Services, Eddy Cue, Apple Music has passed the milestone of 60 million subscribers. This includes both paying subscribers and free trialists. The company has also confirmed that Beats 1, Apple Music’s in-house “radio” station, now has “tens of millions of listeners.” The last update made on Apple’s subscriber count came from the Financial Times in December, which reported that the platform had 56 million subscribers, including its free trialists. The new update on its count comes two months after Spotify announced that it finished Q1 this year with 100 million paying subscribers worldwide.

Audio Streaming Growth Declined by 5% in the US in the First Half of 2019

Growth in audio on-demand streaming volume in the US fell slightly in the first half of this year, both in percentage terms and real terms, according to calculations made by Music Business Worldwide. New mid-year data published by Nielsen Music on Thursday June 27 shows that the US market saw 333.5 billion total on-demand audio streams on services like Spotify and Apple Music in the 24 weeks from January 4 to June 20, 2019. That was up 27.8% on the 261 billion audio streams registered in the US during the same period of 2018. Therefore, the annual jump in total US audio stream volume in H1 2019 vs. H1 2018 was over 4 billion streams smaller than the equivalent growth in H1 2018 vs. H1 2017. The growth number this year (72.5 billion) is down 5.4% on the growth number from last year (76.6 billion). The report further stated stronger growth in on-demand video streams in the US, which increased by 39.6% year-on-year to 174.2 billion in H1 2019.

Amazon Music Launches “Handpicked” Artist-Curated Playlists

Amazon Music subscribers can now listen to playlists that have been crafted by popular artists and bands. The company revealed this new addition to its Amazon Music platform with a debut song collection curated by Katy Perry. The Handpicked tracks center around a “Moving On” theme, which Perry chose, including works by Blink-182, Justin Timberlake, and Taylor Swift. The move is just one part of Amazon’s recent efforts to better compete with other music streaming services like Spotify, Apple Music, and Pandora. Even though exact subscriber numbers are not made clear, Amazon is considered to be among the top three streaming platforms. The company indicated that other artists’ Handpicked albums will be featured on Amazon Music in the near future, though no release dates or musicians have yet been specified.

Judge Refuses to Dismiss $6.6 Million Lawsuit Against Yo Gotti

A North Carolina judge refused to dismiss a $6.6 million judgment against Yo Gotti this week. A month ago, Forsyth Superior Court judge Todd Burke ruled against the rapper, awarding the amount to Michael Terry. The lawsuit originally began when Yo Gotti, real name Mario Mims, attempted to back out of a deal where he received $20,000 to rap over a verse of Winston-Salem rapper, Young Fletcher. Terry, the young rapper’s manager, filed the lawsuit, stating that Yo Gotti refused to sign the paperwork. He also said that Yo Gotti allegedly lured the young rapper to his own label, but to no success. Mims claimed in his legal defense on Monday that he was never properly served the lawsuit. However, the Forsyth County Sheriff’s Office backed Terry’s claim, stating that they had the lawsuit properly served. The damages were originally $2.2 million, which would be awarded to Terry. Then, the Superior Court judge tripled that amount after ruling Mims had engaged in “unfair and deceptive trade practices.” Yo Gotti and his legal team are expected to file an appeal at the North Carolina Court of Appeals.

Germany’s GVL Collected $260 Million for Rights Holders in 2018

In 2018, GVL, the German society for administering neighboring rights, collected approximately €230 million euro ($261 million) for artists, producers and event organizers, a 25.9% decline of income compared to the previous year’s high of €310 million euro ($352 million) due to high payments in the private copying sector. By using a new system for distributions, the organization said that it paid out a total of €287 million ($326 million) to producers and artists in 2018. GVL pays the fees it collects on a fiduciary basis from radio and TV stations and for the communication to the public to its members in the form of a remuneration each year. More than 154,000 performing artists, producers of sound recordings and audiovisual recordings, music and music video clip producers, as well as event organizers, work with GVL. To go into more detail, reproduction rights resulted in income of €83.9 million in 2018 compared to €169.3 million in 2017. GVL benefited in the previous years from one-off financial items based on comprehensive adjustment payments. The highest revenues yielded by GVL in 2018 occurred in the broadcasting revenue sector (about €92.1 million in 2018). The company also saw a noticeable increase of more than 41% in the international rights sector. This amounted to €5.6 million in 2018 compared to approximately €4 million in 2017.

Random Ramblings

  • Neural networks for the music generation.
  • 13 records that were set at the 2019 BET Awards.
  • Taylor Swift sets Apple Music pre-add record with upcoming album "Lover".
  • Shawn Mendes and Camila Cabello’s “Señorita” breaks Spotify record for the biggest single-day debut of a male/female duet.
  • Monsta X teams up with French Montana and drops new video for their new track, “WHO DO U LOVE?”.


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