Last week, we discussed the controversy started by Neil Young removing his music from Spotify because of its carriage of Joe Rogan’s podcast. In that article, we looked at the relationship between music royalties and the decision of Spotify and other music services to emphasize podcasts and other talk programming over music. Today, we will look at how music rights and royalties impact decisions like those of Neil Young and other musicians who may have wanted to pull their music to support the protest over Rogan’s podcast.
At its most basic level, there is the question of how much the artists themselves stand to lose from the withdrawal of their music from a service like Spotify. Young himself said that he would lose 60% of his streaming revenue from pulling his music, which one source estimated to be over $700,000. Given the other streaming services that now exist, his music is still available and generating revenue on his catalog, though apparently less than the amount generated by Spotify. The 60% number in and of itself is interesting as, while artists and other music representatives complain about the Spotify per song payouts (likely because they offer a free, ad-supported tier with lower payouts than those from subscription services), the wider variety of services offered by Spotify seem to bring in big numbers of listeners – likely including many who would not subscribe to a pay-music service. Thus, because of the sheer numbers of listeners, and assuming that Young is representative of other artists, Spotify is responsible for the majority of the streaming revenue that has allowed the music industry to enjoy in recent years some of their most profitable years ever. Even with these banner payouts, as we noted in our article on the Spotify side of the equation, the music industry is still not satisfied, recently calling the payouts “appallingly low.” More on that issue in an upcoming post on the discussions of a US broadcast radio sound recording performance royalty.
Looking at the artist side of the Young-Rogan dispute, as Spotify is generally an on-demand service, Young has the ability (assuming that it has not been relinquished to others or signed away by contract) to ask that his songs be pulled from the service. As we wrote last week, and have noted in the past, on an interactive service like Spotify, where users can control what songs they want to hear by putting them into playlists or listening on demand, the copyright holders in a sound recording have some ability to dictate whether or not a song will appear on a music service. See, e.g., our article here about Adele not allowing her last album to be streamed for a period of time after it was initially released. This is unlike the use of the music on a noninteractive service, like an online simulcast of a broadcast station, where there is a statutory license giving a music service the right to use all music that is legally released.
As we wrote here and here, on a noninteractive service, a musician would have no control over the use of their recordings by a music service. The “statutory license” that noninteractive services can use simply by paying the royalties set by the Copyright Royalty Board, gives those services access to all legally released recordings. There is nothing in the statute or rules set by the CRB that would give an artist (or the copyright holder in the sound recording) the right to prohibit a service from using its music. In fact, as the idea of the statutory license is to give all services equal access to all music in exchange for the payment of a market rate determined by the CRB, allowing an artist to withhold their music from a statutory service would defeat the purpose by allowing an artist to hold out their music for a higher payment.
Performers like Young, who are also songwriters, may have arguments that, while the law mandates that sound recordings be made available to music services, they may have some ability to withhold the rights to the musical compositions (remembering that there are two copyrights in a piece of recorded music, one to the sound recording and one to the underlying musical composition or “musical work” – the lyrics and notes that comprise a song). Yet, in most instances, the right of a composer to withhold use of their music by a noninteractive service relies on an untested theory. In connection with the use of songs by political candidates, both ASCAP and BMI have taken the position that a songwriter can withdraw consent for a political campaign to publicly perform their music. While ASCAP and BMI are not subject to any statutory requirements mandating that they make their whole catalogs available to their licensees, they are subject to antitrust consent decrees which generally require that they treat all music that they administer in the same way, so there has been some question as to whether they can legally allow artists who have given them rights to license their songs the rights to withdraw that permission in specific instances. But SESAC and GMR are not subject to those consent decrees, so songwriters whose music is licensed through these performing rights organizations might have more flexibility to restrict use of their music, depending on their agreements with these rights organizations.
Interactive services, on the other hand, have no guaranteed access to any performer’s music. That has allowed various artists to withhold some or all of their music from interactive services like Spotify. While some major artists own their masters (i.e., the copyright to their recordings), and can unilaterally withhold rights to their music, often the copyrights are assigned to their record labels. Depending on the contracts with those labels, the artists may be limited in what they can dictate about the use of their music. In addition, as has been well-publicized in the last year, many major musicians have sold their rights in their underlying compositions, and in some cases their masters (the rights to the sound recordings), to various venture firms who see music as an investment that will pay returns over time from digital music services and other music users. What rights are reserved in these deals by the artists is unclear – but with politically outspoken artists like Young, Bob Dylan, Paul Simon, and Bruce Springsteen being among those who have assigned their rights to their music, one would imagine that they may well not want their music associated with certain causes and that some rights have been reserved to veto certain uses of their music. In connection with Young’s recent actions, some have suggested that the buyers of these music catalogs are just being sensitive to artist feelings to preserve their reputation in the industry, but there may well be contractual controls for artists to maintain some rights over the uses of their music as well.
It is interesting that, in connection with an interactive service, while artists and labels may have rights to withhold the sound recordings of their music, for the musical work (the musical composition), there is a statutory royalty recently clarified through the Music Modernization Act to allow music services to use the musical composition. Under the Act, once a composer has authorized one sound recording of their musical work to be released to the public, a music service that has obtained rights to use any sound recording legally using that composition can obtain a statutory license to use the musical composition, again by paying a royalty set by the Copyright Royalty Board.
The ability of the musicians to withhold their music is a clouded one – but seemingly has been honored by Spotify leading to all the publicity we have seen in the last few weeks. The complexity of these rights also leads to many questions in the music licensing area that confuse artists, music users and the public all the time. Watch for another of our articles, to be published soon, which will discuss this complexity further and look at proposals to simplify the process.