In a stunning turnaround, streaming giants Spotify are claiming that they overpaid artists last year and want their money back. This coming from a company that has notoriously underpaid artists for plays on their platform.
They say that they are recalculating their earnings to say they want some of the money they distributed back.
Strangely, the ‘overpayment’ is based on an updated royalty code that Spotify is fighting. But the updated code calls for modified and fractional payments to certain bundles and discounted tiers, something that didn’t exist previously.
Essentially, the message is this: if publishers want to hike up rates, they’ll also have to accept any reductions created by the same body of law.
At this stage, the exact amount of ‘overpayment’ is unclear. But publishers are likely to receive concrete numbers on their upcoming statements.
The company has had a running battle with music publishers and that was stepped up earlier on this year when Spotify appealed a decision by the US Copyright Royalty Board’s (CRB) to rate per stream 44% over the next five years.
So, in a turnaround, they’re claiming that music publishers across the globe actually owe them money now that they’ve broken down the numbers to include their different discounted plans.
Music Business Worldwide, broke the story, saying that Spotify informed music publishers this week about their reasoning.
An insider in the music industry told MBW: “Spotify is clawing back millions of dollars from publishers in the US-based on the new CRB rates that favour the DSPs while appealing the [wider CRB decision]. This puts some music publishers in a negative position. It’s unbelievable.”
Spotify says that they will not be asking for payment now, they will instead treat the excess payments as an advance and are expecting to recoup the outstanding cash at the end of 2019.
Spotify also told MBW that they’re making this decision to minimize the impact on artists. DAMN!!!!!
They said: “According to the new CRB regulations, we overpaid most publishers in 2018. 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.”
The new Copyright Royalty Board’s rules state that family plans count as 1.5 subscribers while a student plan counts as half a user. The year-end streaming payouts will be determined by the highest outcome of one of three models. Either a percentage of the company’s total revenue, a percentage of their payout to record labels or a flat fee per subscriber.