In brief: Four of the five largest music streaming services in the US are teaming up to appeal a 2018 decision by the Copyright Royalty Board to raise royalty rates by 43 percent. Spotify, Pandora, Google, and Amazon have jointly filed appeals, stating that the increase will have a substantial negative impact on their businesses. The increase in royalties is set to be rolled out gradually over the next five years.
Early last year, the Copyright Royalty Board ruled that royalties for songwriters on digital streaming platforms would increase from 10.5 percent to 15.1 percent over the next five years. This increase of more than 40 percent was meant to close the gap in the amount of revenue a songwriter receives versus the publisher and record label. Now, the major streaming platforms are fighting back against the increase.
Spotify, Pandora, Google, and Amazon have all filed appeals against the CRB's decision, claiming that the increase raises "serious procedural and substantive concerns." The full statement from Spotify, Pandora, and Google reads:
"The Copyright Royalty Board (CRB), in a split decision, recently issued the U.S. mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB's decision harms both music licensees and copyright owners. Accordingly, we are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision."
The glaring omission from this joint appeal is Apple. The company apparently has no plans to appeal the CRB's decision. Interestingly, Apple Music is the only platform without a free option, and aims to recoup money spent on royalties by collecting a monthly fee from every user.
Apple has also proposed alternatives to the current royalty payment model, including a fixed rate of 9.1 cents paid to the artist for every 100 plays. A flat-rate proposal would hurt services such as Spotify, which depend on revenue sharing to pay out royalties. Spotify is already hemorrhaging money, with losses in 2017 totaling $1.5 billion, and it projects to be impacted more by the CRB's decision than Apple Music.
Royalties paid out to artists on streaming platforms have been laughably low since the services became popular. According to Information Is Beautiful, the "big five" music streaming services pay between $0.0013 (Pandora) and $0.0068 (Google Play) per stream.
For an artist to make the federal minimum wage per month ($1,472), they would need 366,000 streams on Spotify, and over 1 million on Pandora. If you normalize the data to the breakdown of $1, an artist signed to a label makes about $0.18 per $1 in revenue, while the streaming service pockets between $0.27 and $0.35. Independent artists do better, making about $0.64 per $1, but are responsible for their own marketing.