EXTRA It has long been the case that many of the conflicts between rights owners and online platform operators that play out as copyright disputes have as much to do with the mechanics of value capture in online markets as with any of the exclusive rights of copyright owners. There are a number of reasons for that conflation, many beyond the scope of this blog. But one big reason is that copyright law does in fact endow authors and their assignees with explicitly defined exclusive rights, the infringement of any one of which can trigger potentially ruinous statutory damages. It’s the biggest hammer in rights owners’ legal toolkit and in many ways the easiest to wield.
One popular alternative to the ‘pro-rata’ streaming royalty model is the so-called ‘user-centric’ (UC) model. Here, the ≈70% royalty-bearing portion of an individual user’s subscription fee is paid out only to artists that specific individual has listened to; there is no central ‘pool’ of royalties. Universal Music Group, however, is on the record as having concerns about the UC model.
In his reasoning for cutting 6% of Spotify’s global workforce, Daniel Ek wrote: “In 2022, the growth of Spotify’s [operating expense] outpaced our revenue growth by 2X. That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap.” Added Ek: “In hindsight, I was too ambitious in investing ahead of our revenue growth.” That’s something of an understatement.
