The advent of smartphones and digital streaming drastically and rapidly changed the way music is accessed by consumers. Unfortunately for streaming services like Spotify and Apple Music, regulatory standards haven’t kept pace with the tech, and now the business model is being challenged. Spotify is fielding a multi-million dollar lawsuit for distributing compositions (allegedly) without obtaining the proper mechanical licenses. Moreover, streaming outfits like Spotify and Apple Music are facing serious pressure from powerhouse recording artists like Adele, Taylor Swift, and Coldplay to alter their business models and only release certain titles to customers paying for premium accounts. What do these increasing pressures mean for rights holders, and how will it affect the music industry as a whole?


Publishing rights crash: the Spotify lawsuit


With the rise of music streaming, millions of consumers discovered an interactive, effortless means of discovering new artists and albums. Instead of hearing a new single on the radio, finding the artist, buying the album, uploading the files to your computer, and transferring the files to your media player, many have opted for smart playlists, data-driven suggestions and instant access to new music. Just after Christmas 2015, a $150 million lawsuit was filed against Spotify, alleging that the streaming service has been complicit in failing to properly pay enormous amounts of mechanical royalties to countless songwriters for their compositions.


What it comes down to is this: when a streaming service adds a song to its library, it is required by law to pay two types of royalties for that song—one to the recording artist for the sound recording, and something called “mechanical royalties” for the composition paid to the songwriter. These mechanical royalties are the issue at play in this particular legal battle. Many songs obtained by streaming services do not arrive outfitted with all of the metadata needed to find the party owed mechanical royalties for the composition.


What companies like Spotify and Apple Music are facing now is the possibility that they have broken the law by not paying mechanical royalties for large swaths of music streamed on their platforms—a potentially devastating outcome.  If Spotify obtains a song but does not receive the information necessary to properly pay the mechanical royalties, is the company legally responsible? Does the impetus fall on the distribution companies who provide these songs to also provide all of the data for that music? And, perhaps more germane, if these companies are already streaming music for which they are not paying mechanical royalties, and they are ordered to cease and desist until all of these issues have been worked out, how will the way millions of consumers access their music be affected?


Recording artists vs. the free streaming model


The battle over publishing rights and mechanical royalties is not the only obstacle faced by services who stream music to their users. Recording artists have begun pushing back against these services for providing free access to their recordings as well. Major powerhouses like Adele, Taylor Swift and Coldplay have begun to insist that businesses like Spotify limit access to their music to only those members paying higher fees for premium and exclusive content. Currently, the business model for these companies is based on free, instant access to endless titles. If the likes of Swift and Adele have their way, this model will change, and unfettered access to this (now) exclusive content will only be possible if the consumer pays a fee. This is a drastic shift in the way users of these platforms will interact with music.


Who will budge?


Music technology has developed rapidly, and even though the consumer’s music experience has become more and more simplified and user-friendly, the guidelines and regulations surrounding who can and should profit from music remains mired in controversy. It can be complicated (for music consumers and music makers alike) to understand who exactly owes and is owed.


Streaming companies quickly made enormous amounts of music available to millions of users very quickly, but are now dealing with the ramifications of disorganization and possible negligence when it comes to making sure those with creative and legal rights to these compositions are being compensated. Industry giants are pushing back against the tide of digital sharing, and disrupting what has swiftly become a way of musical life to many consumers.


How will these separate but related challenges to the music industry’s status quo affect the way musicians reach their audiences?  How will it change the way consumers experience music? Some voices in the conversation say that those like Adele and Coldplay are being selfish, and resisting progress that has already taken place. Others advocate the rights of artists to profit from their intellectual property. What do you think? Leave a comment below and share your thoughts with us!


Rights Crash: Digital Streaming Services Face Pressure from Industry Insiders

Category: Music Industry

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