Intellectual Property

Short Arms And Deep Pockets: Tech Giants Still Hate Paying Artists

This is truly a bad look.

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Spotify, Google, Pandora, and Amazon are four gargantuan tech corporations who are in direct competition with one another for your music-streaming subscription dollar. Yet, they recently banded together to form a multibillion-dollar Voltron hellbent on ensuring that musicians are paid the bare minimum for the exploitation of their work. These behemoths’ quibble is with the Copyright Royalty Board, who recently, after years of consideration, a thorough review of thousands of documents, and hearings involving dozens of witnesses, took the wholly rational and considered step of raising internet streaming royalties by small percentages for the next few years, maxing out at 15.1 percent of total content cost in 2022.

What this means is that a maximum of 15.1 percent of the monies received by app companies who do little more than sell access to artists’ music will be paid to the artists (to be split with their labels and publishers and other rights holders). In exchange for providing the digital platforms, the tech companies will be stuffing their gaping maws with the remaining 85 percent of the streaming revenues, which revenues now basically fuel the entirety of the music business.

But even this 15 percent pittance for the artists is offensive to the app purveyors. Their dismay is rooted in the compulsory license provision in 17 U.S.C. 115, which allow songs to be broadcast freely so long as certain royalties are paid. This provision includes in its ambit “bundled music services” and streaming platforms such as Spotify. Per the Copyright Act, every few years the powers that be at the Copyright Royalty Board hear evidence on the evolution of the music business and issue an equitable decree setting the royalty percentages going forward. Last month, noting the stunning rise in streaming revenues, the Copyright Royalty Board issued modest increases in streaming royalties for each of the next few years and, shockingly, the tech giants went into a tizzy.

The tech company’s concern is laid out in the CRB’s ruling, which notes that their “content acquisition costs” were their “biggest barrier to profitability.” In other words, those pesky artists and their demand for compensation was making the operation of music apps too costly.

Spotify, by some accounts, has a valuation of over eight billion dollars. Google and Amazon are not impecunious companies. Yet, they have appealed (joined by also-ran Pandora) the CRB’s order requiring them to pay moderately higher rates to artists on the basis that doing so will mean they make less. It is the relatively shameless type of gambit that tech juggernauts used to pull off all of the time back in the halcyon days when they had the public’s support. But, now, tech companies exist in the same space as tobacco companies, and just about everything they do seems to further inflame public disgust and distrust. This has been no different, as the public has reacted to the tech offensive on musicians with enough ire that the AmaGoogSpotPando cabal has had to issue a public statement claiming they are not doing what they are obviously doing. Truly a bad look.

But, hey, at least these companies are paying the musicians something, unlike those charlatans at “fitness startup” Peloton. It will not surprise you to hear that a major component of Peloton’s business is an app that streams videos and that those videos heavily feature music and that this rising tech company has refused to pay for most of the music that soundtracks its videos.

For those unfamiliar with Peloton, it is a stationary bike that you ride while streaming music videos to “get you pumped.” In another glaring example of a tech company disregarding artists’ rights, Peloton allegedly incorporated all sorts of music into its videos (which also feature trainers on bikes) without obtaining proper licenses. As the complaint lays it out: “Peloton is a textbook willful infringer. It has used more than 1,000 musical works owned or administered by Plaintiffs over a period of years in the videos that it makes available to its hundreds of thousands of customers without a synchronization (or ‘sync’) license for a single one of those songs.”

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The music is a primary component of the Peloton Experience, as it both provides a rhythm for the biking and motivation for the rider. One of the songs allegedly used without a license is “Shallow” by Lady Gaga and Bradley Cooper, which certainly would motivate me to pilot my bike off a cliff. But, in any event, it appears that proper licensure for this integral part of their business was simply brushed off as less important than, perhaps, the design of the fabulous Peloton-branded leggings (which retail for $68.00).

While streaming services would not exist without musicians and stationary biking would be 98 percent less enjoyable, the companies behind these services and products tend to think of musicians as little more than a nuisance and a faction against which to fight. This approach is woefully misguided as it is ensuring that new and up-and-coming musicians do not receive the minimum funds upon which to live and develop their craft and produce at some point compelling new music. And it makes it more likely that all of our future music will be corporate-sponsored or AI- or robot- or Marshmello-created. For lovers of new and innovative music, this is a very bleak future, but for lovers of minimal “content acquisition costs,” this most likely sounds very close to ideal.

Scott Alan Burroughs, Esq. practices with Doniger / Burroughs, an art law firm based in Venice, California. He represents artists and content creators of all stripes and writes and speaks regularly on copyright issues. He can be reached at [email protected], and you can follow his law firm on Instagram: @veniceartlaw.

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