Why Innovate When You Can Legislate, Investigate and Intimidate? Spotify Wants Government to Save it From Competition

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A Timeline of Spotify hardball lobbying efforts with EU, State AGs, Executive branch, DOJ, FTC and Congress since hiring former Obama/Clinton administration official. 

We have been tempted to stay out of the debate over Apple Music and let the three big music tech companies Apple, Spotify and Google/YouTube rip each other apart.  After all,  real market competition from these companies for our recordings and songs could eventually lead to better pay for artists.

But we can’t sit this one out.   Why?   Because Spotify as usual seems to be up to its habitual dirty tricks using our money.  This time by hiring a recently departed Obama administration official and apparently using his revolving-door political connections and some of Pandora’s lobbyists to engage the U.S. Congress, the Federal Trade Commission and state Attorneys General to protect Spotify’s  untenable and money losing business model.  The end goal of these efforts WILL negatively impact artists.

Jonathan Prince Employment Timeline--Open Secrets
Jonathan Prince Employment Timeline–Open Secrets

If you zoom out and look at Spotify’s lobbying activity in sum total they appear to have three goals:

1) Protect their free tier (which pays artists 1/7 of what the premium subscription service pays) but makes them more valuable at IPO or as a takeover target to an advertising-driven company like Google.

2) Get Apple under some kind of anti-competitive regulation in EU, US and state AGs.

3) Get rights holders of sound recordings (Artists and Record Labels) under some sort of anti-competitive regulation in EU, US and US states  so they are obligated to license sound recordings to Spotify outside of the free market (like the ASCAP and BMI rate courts).

Yes, we were disappointed with Apple’s initial attempt to not pay artists during it’s 90 day free trial (they’ve since changed their tune), the fact is Apple is still better than Spotify for artists:

1) Apple free trial pays about $0.002  a spin while the last time we checked Spotify pays about $0.0009 per spin on their ad supported free tier  (Online advertising rates have experienced a secular decline since then).

2) Apple free trial is 3 months.  Spotify free tier is forever. After 3 months Apple free trial ends and subscribers move up to subscription tier.  We expect Apple’s subscription tier to pay more than Spotify subscription so this means a significant increase in revenue per spin to artists.  Plus–we don’t have to go through the absurd revenue share calculation of the advertising peddlers.

3) Spotify is actively trying to get users to unsubscribe from its premium service offered through the Apple App Store, which will likely mean an overall net reduction in revenue to artists due to inserting inconvenience into the transaction.  Apple is actively trying to encourage subscription uptake which will mean an overall net gain in revenue to artists.

Artists have an interest in seeing a competitive marketplace for streaming services that isn’t dominated by the duopoly of YouTube and Spotify. According to Kara Swisher, the top tech journalist:

Omid Kordestani, who has just temporarily replaced Nikesh Arora as chief business officer of Google, is joining the board of Spotify, according to people with knowledge of the situation.

In addition, sources said, one of the search giant’s former execs, Shishir Mehrotra, will become a special adviser to CEO Daniel Ek and the company’s management.

The move is a fascinating one, especially since sources inside Google said that new YouTube head Susan Wojcicki has expressed interest in acquiring the popular online music service if it were for sale.

YouTube and Spotify share a board member! (DOJ: where is that anti-trust investigation?)   Every quarter when artists get their royalty statements they have tangible evidence of the damage created by this duopoly.

Here is the kicker, we should welcome investigations by the  European Commission, State AGs, Congress and DOJ into anti-competitive  behavior and collusion in the digital music licensing marketplace for sound recordings.  But it must include ALL players!  Broaden it to include Spotify, Google/YouTube,  Pandora, Amazon, IHeartRadio, NPR, MERLIN (indie label licensing authority) and the major labels. (The feds already have songwriters and their PROs under DOJ supervision).

Fair is fair. Democracies don’t function when certain politically connected companies and individuals get different treatment under the law.  Further the government needs to get out of the business of licensing music. (See my argument in detail here.) We are wasting vast amounts of federal manpower and taxpayer dollars  when our nation(s) faces other more important challenges.  Seriously we’re worried about streaming services profit margins when we face very real threats from Greek bankruptcy? A resurgent and expansionist Russia? Chinese hackers?Federal cyber breaches, and ISIS inspired terrorism?

Let me remind you once again: Artists are not asking for a handout from the federal government. In this debate it is the multi-billion dollar streaming services asking for the handout. Spotify is asking for protection from competition. Artists welcome competition. Artists are simply asking the federal government to do less and stop regulating the market, let our songs and sound recordings be priced in the free market.

References For Timeline