Exploration Weekly - Music Companies Push Back on Canada’s Streaming Rules / SoundExchange Releases AI Registry / MLC and Spotify Legal Clash Continues

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In this newsletter:

• Major Music Companies Send Letter to Canada’s CRTC, Urging It Not to Regulate Streaming as If It Were Radio
• SoundExchange Releases Registry of Tracks Authorized for AI Use
• The MLC and Spotify’s Legal Back-and-Forth Rumbles On as MLC Says Spotify Is “Relying on New Purported Facts”
• TikTok’s Streaming Loss Is Spotify’s Gain — SPOT Cracks a Record High Following TikTok Music Shutdown Announcement

Industry groups representing major record labels and streaming platforms have urged Canada’s telecom regulator, the CRTC, not to treat streaming like radio in its regulations.

SoundExchange is developing a global AI registry to help sound recording creators and rights owners protect their work from unauthorized use in AI model training.

The back and forth in the big bundling dispute between Spotify and US collecting society The MLC continues. Last month Spotify urged the court to dismiss The MLC’s lawsuit. In a new legal filing, The MLC argues that the legal standard for dismissal at this stage has not been met.

Now, the details...

Exploration Weekly - September 27, 2024
Compiled by Ana Berberana

Major Music Companies Send Letter to Canada’s CRTC, Urging It Not to Regulate Streaming as If It Were Radio

Industry groups representing major record companies and streaming platforms have a message for Canada’s telecom regulator: streaming is not radio, and shouldn’t be regulated as if it were. “We write to you today to reinforce an important message shared throughout the consultations: radio and audio streaming are not the same,” stated a letter from Music Canada and DiMA (the Digital Media Association) to Canada’s telecom regulator, the CRTC. Music Canada represents the country’s three major recording companies: Sony Music Entertainment Canada, Universal Music Canada, and Warner Music Canada. DiMA represents various digital media companies, including Amazon Music, Apple Music, and Spotify. The groups were responding to the CRTC’s recent series of workshops on implementing new rules governing streaming services. Under those rules, streaming services that are not Canadian-owned and have more than CAD $25 million (approx. USD $18.5 million) in revenue in Canada annually are required to pay 5% of that revenue into funds that subsidize Canadian content and creators. Under that plan, 1.5% of music streamers’ revenue would go towards subsidies for local radio stations. The regulations, which stem from a new law – the Online Streaming Act, passed in 2023 – echo earlier regulations from the broadcast era, which require Canadian broadcasters to pay towards funds that support the creation of Canadian radio, TV and film content.

SoundExchange Releases Registry of Tracks Authorized for AI Use

SoundExchange is developing a global artificial intelligence (AI) registry for sound recording creators and rights owners. But most AI companies have scraped copyrighted data already to train their models. Is this too little, too late? SoundExchange President & CEO Michael Huppe shared the information during a discussion with artist Timbaland about music rights at the Fast Company Innovation Festival in Manhattan last week. This new registry will provide a much-needed resource for creators and rights owners to protect their rights related to the use of their content in AI models. It will allow them to reserve those rights, if they so choose, against training by AI algorithms. While U.S. law does not require such a reservation to protect creators’ rights, the global registry will be another tool to help AI companies properly handle their training data and to help facilitate similar protections in Europe and elsewhere. SoundExchange says it plans to launch this registry in Q1 2025, as an evolution of systems purpose-built by SoundExchange for the collection and distribution of recording royalties. The registry will utilize SoundExchange’s authoritative and comprehensive international standard recording code (ISRC) database. Companies building AI training models will be able to reference the database of authorization declarations before ingesting recordings. “The rapid proliferation of companies building and leveraging AI music models demands creators have an ability to declare easily whether or not they want their work used in that process,” says SoundExchange CEO Michael Huppe. “Our driving mission is to simplify the music industry and protect the value of music.”

The MLC and Spotify’s Legal Back-and-Forth Rumbles On as MLC Says Spotify Is “Relying on New Purported Facts”

US collecting society The MLC has asked the courts to reject an attempt by Spotify to dismiss its lawsuit over the big bundling discount dispute. We already know the arguments of both sides in this bust up and the latest court filing from The MLC doesn’t add anything to that. However, the collecting society insists that the complaints set out in its lawsuit cannot, as Spotify claims, be dismissed at this stage without full scrutiny. The MLC says that, in the motion it filed last month, Spotify failed to meet the legal standard necessary for dismissal, first by “disregarding or mischaracterizing well-pleaded allegations”, then by “relying on new purported facts outside of the complaint”, and finally by “making merits-based arguments concerning mixed questions of law and fact that are inappropriate for adjudication at this preliminary stage of this case”. This dispute centers on Spotify reclassifying its premium subscription product in the American market as a music + audiobooks bundle, so that it can rely on a bundling discount in the compulsory license that covers the mechanical rights in songs in the US. In practical terms, that means it pays less to music publishers and songwriters each month. In order to qualify for the bundling discount, Spotify needs to show that the fifteen hours of audiobooks access that now comes with a premium subscription has more than ‘token value’. The MLC, which administers the compulsory license, argues that, because most Spotify subscribers signed up for a music subscription, the audiobooks access does not have more than token value. Plus, because audiobooks access was added to the main premium subscription product at no extra cost months before Spotify launched a standalone audiobooks subscription product, the main premium product isn't a true bundle.

TikTok’s Streaming Loss Is Spotify’s Gain — SPOT Cracks a Record High Following TikTok Music Shutdown Announcement

TikTok Music’s shutdown plans entered the media spotlight yesterday with a confirmation that the standalone app, having only launched in 2023, would cease operating in November. As things stand, the precise reason(s) for the abrupt move are unclear. However, licensing hurdles, lingering friction from the TikTok-Universal Music impasse, and/or slower-than-expected TikTok Music adoption all come to mind as possibilities. Whichever factors contributed to the streaming app’s demise, the news is a welcome surprise for competitors like Spotify, Apple Music, and Amazon Music. Of course, if TikTok Music had possessed an unlikely path to commercial success, its shutdown wouldn’t have made much of a difference. But given the many examples of TikTok proper’s discovery and promotion effectiveness, there was seemingly an opportunity to convert users into subscribers via the main app – and more directly spur streams on particular tracks in the long run. Additionally, the service was operating in nations where substantial streaming market share is up for grabs: Brazil, Indonesia, Singapore, Australia, and Mexico. In any event, as initially mentioned, Spotify stock (NYSE: SPOT) is riding higher than ever in the wake of TikTok Music’s closure announcement, to the tune of a record per-share price of $386.96 today. Subsequently, SPOT settled to a best-ever $383.96 trading-end price, reflecting a $77.10 billion market cap.

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