Spotify Now Paying SoundExchange for Mobile Radio Streams in U.S, Lowers Royalty Bill

Spotify changes royalty payouts











(from Billboard Magazine, September 24, 2012) The web-based, free Internet service, Spotify, is now paying royalties to SoundExchange under a new statutory license. Since Spotify is an online service, they don’t have to pay royalties as an on-demand radio service such as Pandora.

On-demand radio services pay special royalties because of the way they distribute their songs. Services such as Pandora receive permission from the owners and figure out royalty rates before distributing. With Spotify beginning to switch to this type of service, they are now paying royalties out to organizations other than United States.

Spotify may begin to see songs or artists disappear from their services due to subscription service holdouts on the mobile app. Now that Spotify is becoming more like Pandora, in that it has less controlled service than what it has now, royalties and music availability must be reevaluated. Spotify’s main marketing focuses on using a radio service where you can save your songs, but such services are illegal using licenses that Spotify has been using. For what Spotify is moving towards, using this new royalty will allow the rate to lower.

Currently, the royalty rate for a normal webcast stream is 0.21 cents per stream. Spotify on the other hand, pays out 0.5 cents per stream. This is due to the more interactive, “saved-songs” service that they provide that is unique to any other service to the internet today. Spotify’s services do not account for a large portion of many artists’ revenue, but the new license allows artists to earn a stake in a service that is very unique.

Although the money isn’t relative to what artists have been paid in the past, 45% of the mobile radio royalties from SoundExchange will be able to be paid now.