Exploration Weekly - DSPs Win Appeal Over CRB Royalty Hike / “Apple One” Subscription to Launch in October / Spotify Partners with Russian Telco MTS

“Life exists for the love of music or beautiful things.”

G.K. Chesterton

The DC Circuit Court of Appeals decided in an opinion published on Tuesday that the royalty hike set two years ago by the Copyright Royalty Board (CRB) provided insufficient notice and reasoning, leaving the CRB to take another look at what Spotify and other digital streaming services will be paying for the rights to distribute musical works. Every five years under copyright law, the CRB undertakes rate setting and the terms for a compulsory mechanical license.

A recent Bloomberg report stated that Apple is soon launching subscription bundles dubbed as “Apple One” as early as October. The service will pull in its Music, TV, News, Gaming, and cloud storage services together under one monthly price, and it will be led by Apple’s services chief, Peter Stern. In addition, there will be differently priced tiers that consumers can choose from in order to benefit from cheaper monthly prices.

A month after Spotify launched in Russia and twelve other markets, the streaming service recently announced that it has entered into a strategic partnership with one of Russia’s top telcos, Mobile TeleSystems (MTS), which counts 78.5 million subscribers at the end of Q1 2020. This entire subscriber base will be offered six months of Spotify Premium for free. Russia was the fastest-growing major market globally for the record industry in 2019, with a 50.3% revenue increase year-on-year, according to IFPI statistics.

In this newsletter:

Music Streamers Win Appeal Over Royalty Hike for Song Owners
“Apple One” Subscription Bundles to Launch as Early as October - Including Music, TV, News, and Gaming
Spotify Offers 78M Russians 6 Months of Free Premium, Via Partnership with Telco MTS
US Supreme Court Asked to Intervene in “Stairway To Heaven” Copyright Dispute
A Declaratory Judgment on Future Termination Notices is Justified, US Judge Now Says in Big Termination Rights Case
Tencent Music Beats Spotify Growth Rate, Turns Healthy Profit in Second Quarter

Now, the details...
Compiled by Heidi Seo

Exploration Weekly - August 14, 2020

Music Streamers Win Appeal Over Royalty Hike for Song Owners

In an opinion that was made public on Tuesday, the DC Circuit Court of Appeals decided that the Copyright Royalty Board (CRB) provided insufficient notice and reasoning when setting royalty rates two years ago. The three-judge panel within the Library of Congress, must now take another gander at what Spotify and other digital streaming services will be paying for the rights to distribute musical works. Under copyright law, the CRB undertakes rate setting and the terms for a compulsory mechanical license every five years. Recently, in a 2-1 vote, it was decided that digital services would need to increase by 44% what they were paying from preexisting rates. The DC Circuit Judge Patricia Millett responded in an opinion by saying, “[W]e agree with the Streaming Services that the Board failed to provide adequate notice of the final rate structure.” The DC Circuit also noted the CRB for failing to explain why it didn’t use previous rates as a benchmark. They additionally questioned how the CRB determined how revenue from bundled offerings is counted.

“Apple One” Subscription Bundles to Launch as Early as October - Including Music, TV, News, and Gaming

According to a report published by Bloomberg on August 13, Apple is getting ready to launch subscription bundles - pulling its Music, TV, News, Gaming, and cloud storage services together under one monthly price - as early as October. The bundles are being dubbed as “Apple One,” and the project is being led by Apple’s services chief, Peter Stern. The report also suggests that consumers will be able to choose differently priced tiers of the “Apple One” bundle, which offer the benefit of a cheaper monthly price than subscribing to each service separately. The basic “Apple One” package will pull together Apple Music and Apple TV+. The next tier, for a higher price, will also add the Apple Arcade gaming service, and an additionally expensive tier will throw in Apple News+. The most expensive tier of all will offer users subscriptions to each of Apple Music, Apple TV+, Apple Arcade, Apple News+, as well as extra iCloud storage for files and photos.

Spotify Offers 78M Russians 6 Months of Free Premium, Via Partnership with Telco MTS

Spotify has entered into a strategic partnership with one of Russia’s top telcos, Mobile TeleSystems (MTS), just a month after the streaming company launched in Russia and 12 other markets. MTS had 78.5 million subscribers at the end of Q1 2020, and according to the partnership, the telco company’s entire subscriber base will be offered six months of Spotify Premium for free. After the six month free deal ends, MTS subscribers using Spotify premium can continue using the service by paying RUB169 (approximately $2.30) per month, which will be charged via their mobile account. Russia’s population counts 144 million people, including an estimated 95 million+ smartphone owners. According to IFPI statistics, Russia was the fastest-growing major market globally for the record industry in 2019, with a 50.3% revenue increase year-on-year.

US Supreme Court Asked to Intervene in “Stairway To Heaven” Copyright Dispute

In 2014, the estate of Randy Wolfe, aka Randy California, first sued Led Zeppelin, alleging that the band’s “Stairway To Heaven” ripped off an earlier song called “Taurus,” which Wolfe had written for his band Spirit. In 2016, a jury ruled that the two songs were not similar enough to constitute copyright infringement. The estate then took the matter to the Ninth Circuit appeals court, criticizing various decisions made by the judge in the original jury trial. The appeals court initially concurred with the estate and ordered a retrial. But then it reconsidered the matter en banc, with more judges involved, and that time decided that the original ruling in Led Zepp’s favor should stand. The estate now wants the Supreme Court to get involved, stating that the Ninth Circuit made two mistakes in its second ruling, the first relating to what elements of a song enjoy copyright protection, the second regarding what constitutes originality under copyright law.

A Declaratory Judgment on Future Termination Notices is Justified, US Judge Now Says in Big Termination Rights Case

Further developments have been made in the termination rights case involving Universal Music and heritage artists. The court hearing that case has ruled on various technicalities as it relates to declaratory judgments this week. That includes considering efforts by the artist side in the dispute to add new plaintiffs and defendants to the lawsuit. Artists have also requested for a declaratory judgement on the validity of their termination notices, which would amount to a rejection of the labels’ work-for-hire argument. This is particularly important for those artists involved in the case who are yet to reach the 35 year point where their termination notices would go into effect.

Tencent Music Beats Spotify Growth Rate, Turns Healthy Profit in Second Quarter

Chinese music streaming company Tencent Music Entertainment reported a 17.5% revenue increase to RMB 6.93 billion ($981 million) from last year, according to the company’s second quarter earnings released August 10, a quicker pace than Spotify’s 13.2% growth for the same periods. Like Spotify, TME has licensed long-form, spoken word content to transition into a pan-audio platform. In the second quarter, as long-form audio reached 9.4% of monthly active users, TME tripled the number of licensed non-audio tracks. TME also has a two-pronged business model that created a $157 million operating profit on $981 million of revenues. The four music services - QQ Music, Kugou Music, Kuwo Music and WeSing - combined for $314 million, a 42.2% increase from 2019, driven by 65% growth in subscription revenues from 47.1 million paid users, up 51.9% year over year. A majority of TME’s revenue comes not from music but from social features such as giving virtual gifts.

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