Spotify says it has to pull out of Uruguay. Chris Castle weighs in…
Spotify announced that it would pull out of Urguay after a new law added performers to the royalties that the music streamer must pay. Not so fast, says the country’s President Luis Lacalle Pou who clai,ms he’s cut a deal to keep the streamer operating there. Chris Castle weighs in…
Op-Ed CHRIS CASTLE of Music Tech Policy
It’s a new day in Latin America–Spotify is throwing its toys out of the pram and going home.
In a carefully worded statement, Spotify has made good on its threat to leave the Uruguay market:
The government of Uruguay recently passed a budget bill that includes dramatic changes to the way music works in the country (the Rendición de Cuentas). Spotify already pays nearly 70% of every dollar it generates from music to the record labels and publishers that represent and pay artists and songwriters and has contributed more than $40B to date. The changes in this bill could force Spotify to pay twice for the same songs and unless the government makes it clear that record labels and publishers to whom we pay that ~70% should bear the responsibility for these costs, this will make our business of connecting artists and fans unsustainable.
The legislation at issue is an effort by Uruguay to create a streaming royalty paid by the platform to benefit both featured and nonfeatured artists as we reported last week. The legislation at issue in Uruguay in rough translation states:
“ARTICLE 36.- The performer of a literary or musical work has the right to demand remuneration for its interpretation broadcast or retransmitted through radio, television, internet or digital networks of any type, or recorded or printed on disk, film , tape, thread or any other substance, medium or body suitable for sound or visual reproduction. If an agreement is not reached, the Arbitration Court established in article 58 of this law will be resorted to.”
“ARTICLE 39.- “Performing artists, with respect to their power of public communication and making phonograms and audiovisual recordings of musical themes available to the public, generate in all cases the right to fair and equitable remuneration for its exploitation. It is also established that the management entities duly authorized to operate will represent performers, in accordance with the regulations of the Executive Branch, and in accordance with the provisions of article 24 of Law No. 17,616, of January 10, 2003.”
Notice that the language grants the performer the right to negotiate compensation from Spotify, no rate specified. If the performer and Spotify can’t reach an agreement, then the issue goes to arbitration, again no rate specified. Given that no one knows what the rate is, Spotify is using its monopoly power to dictate to the nation of Uruguay that even one peso more is too much.
Not only is Spotify reacting with its usual arrogance, it’s continuing to run this hogwash profitability argument about 70% of every dollar it makes from music. As we know, Spotify is a company that has not made a profit since inception some 15 years ago other than the odd quarter here and there. This “we can’t make a profit” bunk is wearing a bit thin.
Obviously, tech oligarch and CEO Daniel Ek is a billionaire, the company has had TWO separate stock buy backs for $1,000,000,000 each, and paid $300,000,000 for a naming rights deal with Barcelona football club (after Ek’s failed bid to buy Arsenal). Where did all that money come from? It came from somewhere.
So it’s not that they don’t have the money, it’s that they want you to keep your eye on profitability, the thing they care about the least but control the most through accounting maneuvers. Why this distraction? Because the value is in the stock not the profit, and they don’t want to share. Pay no attention to that man behind the curtain. (I co-wrote a paper for WIPO on this subject with the economist Claudio Feijoo where we went into these issues on a pretty deep dive.).
When Spotify says they pay “70% of every dollar it makes from music” there’s a judgement in there that the only value they should share with artists is the money Spotify recognizes as profit from music, not the name and likeness value and other intangibles that they trade on from both featured and nonfeatured artists. Remember nonfeatured artists, the session players, background singers and other players on the recordings Spotify streams usually get zero payments from streaming.
Uruguay is saying enough of this hogwash. Failing to support musicians, especially local musicians, is damaging to their national culture. Spotify can be replaced. The musicians cannot.
Who will replace Spotify when they withdraw from Uruguay? When a monopolist withdraws from a market, the absence of the bully creates wonderful opportunities for a local competitor, particularly a Spanish language competitor who is willing to play by the rules. Seriously, Spotify’s withdrawal could be the best thing that ever happened to Uruguay’s music business.
Plus, we haven’t heard a peep from Apple which presumably will continue to operate. As Lord Nelson said to his officers, “When the enemy is committed to a mistake, we must not interrupt him too soon.” If I’m Apple, I’m thinking that whatever the cost of paying a royalty to musicians in Uruguay, it’s way less than the cost of ejecting my competitor from the market. So please, Danny, bitch away.
All and all, from the government’s perspective, if a foreign monopolist doesn’t want to comply with local laws and treat their musicians fairly, and if their withdrawal opens the door for local entrepreneurs to replace them in a way that respects national culture, they should just have one question. Would today be too soon for Spotify to leave the country?
From the musicians perspective, if I’m not making any money from Spotify anyway and getting dissed for my pains and treated like I’m an idiot, I am indifferent on an ontological level–imagine an indifference greater than which there can be no other indifference and that’s me.
I’m reminded of the lyric in Studio Musician, the Rupert Holmes song.
“I am a studio musician, we’ve never met, yet you know me well
I am the English horn that played the poignant counterline upon the song
You heard while making love in some hotel
I am a part of you, I’ve never tried for fame
You’ll never know my name”
Well, you will now, Danny boy, you will now.
