The Expansion of Spotify and International Copyright Law: Impact on Artists
Vol. 43 Associate Editor
In February 2021, Spotify announced its intention to launch its service into 85 new markets across Africa, Asia, Europe, Latin America, and the Caribbean. Although this is the company’s broadest expansion to date, some may have been surprised to learn that there remained at least 85 markets in which Spotify hadn’t already launched. Indeed, streaming services are the widely accepted future of the music industry. Their market share grows rapidly every year, and in 2020, streaming accounted for 62.1% of global music revenue. Spotify and other streaming services have changed how artists profit from their work. Instead of seeking to maximize sales, artists now seek to maximize streams. In other words, rather than thinking about how many people buy their music, artists now focus on how many times people hear it. Naturally, this shift has far-reaching implications for artists and the music industry more broadly. International copyright law is the framework that makes Spotify’s expansion possible. Nonetheless, existing law does not adequately protect artists. Despite forming the basis of streaming platforms’ value, artists are at present being stripped of significant gains. As the World Intellectual Property Organization (WIPO) recently confirmed in its 2021 report analyzing the issue, they are being grossly undercompensated by streaming services and are therefore unduly harmed by the expansion. Various actors are implicated by the global expansion of streaming platforms. The interests of artists, record labels, streaming service companies, and listeners are at issue. Artists and record labels are eager to expand their listening base, and obviously, geographical expansions of streaming services bring in more listeners. Spotify’s recent expansion could bring entire genres of music into the global music consciousness. At the same time, since domestic copyright laws tend to be complex and rapidly evolving, and since streaming services are required to secure new licenses in each of their territories of operation, their expansion increases the burden on record labels to control their artists’ agreements related to each of these territories. Labels might struggle to handle the increased burden – at their artists’ expense. International copyright law partly addresses this issue. The 1996 WIPO Internet Treaties (consisting of the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty), which were adopted under the 1886 Berne Convention for the Protection of Literary and Artistic works, facilitate the process of clearing licensing rights in different territories, govern this area of law. By strengthening legal and commercial certainty at an international level, the treaties have bolstered right holders’ confidence in licensing their rights to digital services in new territories. In addition, the international treaties have served as the basis for most of the treaty signatories’ domestic copyright legislation. This legal framework has thus ensured the continued existence and expansion of streaming services. Nonetheless, the current legal framework of international copyright law was not built to account for streaming services. The applicable treaties were drafted well before streaming services became commonplace. They confer two main rights on artists: the right of communication to the public and the right of making available. However, under the existing legal framework, these rights are not protected from transferability. As a result, these rights are commonly contracted to the record labels who in turn contract them to the streaming service. The labels then receive a negotiated rate for all the recordings from the streaming service, a portion of which is, in turn, passed on to the artist as provided for by the terms of their artist agreement. Moreover, the “per-stream” payments due to artists under Spotify’s current remuneration structure are negligible and in any event grossly disproportionate compared to the value transferred to streaming services. Artists are left unfairly undercompensated while others profit from their work – including online businesses and services who stream their songs for their own gain. Nonetheless, artists (and their labels) feel dependent on streaming services for survival and most simply do not have the leverage to negotiate contracts with more favorable terms. This issue has escalated with the increased pervasiveness of streaming platforms, and it is further exacerbated by the continued global expansion of these services. The problem has not gone unnoticed, and several proposals have emerged to address it. The most popular solution – championed by WIPO – involves a right to streaming remuneration. In fact, Spain has successfully adopted such a policy domestically by adding an unwaivable remuneration right to the exclusive right of making available to the public, payable directly from the streaming service to the artist through a collective management organization. This is an attractive solution. It is a legal ‘add-on’ that builds on the existing legal framework rather than requiring a complete overhaul and allows record companies to retain their contracts with performers. It would also correct the current gross imbalance between the value derived by Spotify from artists’ work and their compensation. Of course, in the short term, streaming services may be inconvenienced by the burden of administering the extra payment. As Spotify’s Spanish representative stated, the remuneration right in Spain has “increased [their] losses for [their] service in Spain [and] has made it harder . . . to have a path to profitability and margin expansion.” Nonetheless, thinking in the long term, Spotify should be glad to bear the increased burden this extra payment places on streaming services, since the music industry depends on artists for survival and currently they are disincentivized from entering the industry by unfair compensation. A functioning copyright system (that is, one which allows for appropriate artist compensation) is necessary for the music industry to exist. Although international copyright law, as it currently stands, has allowed for the rapid expansion of streaming services, it also risks dismantling the entire industry if it does not adapt to the current reality of the industry. Streaming services should be glad to bear the short-term cost of its adaptation.
 Spotify Expands International Footprint, Bringing Audio to 80+ New Markets, Spotify Newsroom (Feb. 02, 2021), https://newsroom.spotify.com/2021-02-22/spotify-expands-international-footprint-bringing-audio-to-80-new-markets.  Anne Steele, Spotify to Expand its Global Footprint, Entering 85 New Markets, Wall St. J., Feb. 22, 2021.  IFPI, Global Music Report 3 (2021).  Catherine Jewell, Creating Value from Music: the Rights that Make it Possible, WIPO (2016), https://www.wipo.int/ip-outreach/en/ipday/2016/creating_valu_from_music.html.  See generally Christian Castle & Claudio Feijóo, Study on the Artists in the Digital Music Marketplace: Economic and Legal Considerations, World Intellectual Property Organization [WIPO] (2021), fim-musicians.org/wp-content/uploads/2021-castle-feijoo-EN.pdf.  See Spotify Expands International Footprint, supra note 1.  Id.  Lauri Rechardt, Streaming and Copyright: a Recording Industry Perspective, WIPO (May 2015), http://www.wipo.int/wipo_magazine/en/2015/02/article_0001.html.  Id.  Id.  Annalisa Choy, Music You Love: Harmonizing Music Streaming and International Copyright Law, Cornell Int’l L.J. (Apr. 27, 2018), https://cornellilj.org/2018/04/27/music-you-love-harmonizing-music-streaming-and-international-copyright-law.  Castle & Feijóo, supra note 5, at 14-15.  Id. at 8.  Id.  Id.  Id.  Rechardt, supra note 8.  Andy Cush, How Musicians Are Fighting for Streaming Pay During the Pandemic, Pitchfork (June 29, 2020), https://pitchfork.com/features/article/how-musicians-are-fighting-for-streaming-pay-during-the-pandemic.  See generally Spain: The First Member State to Implement a Remuneration Right for Streaming, Pay Performers (Oct. 15, 2020) [hereinafter Spain]; Castle & Feijóo, supra note 5, at 9.  Spain, supra note 19; Chris Castle, Riding the Third Rails: Making the Case at WIPO for Performer Streaming Remuneration, Music Technology Policy Blog (Jun. 9, 2021), https://musictechpolicy.com/2021/06/19/riding-the-third-rails-making-the-case-at-wipo-for-performer-streaming-remuneration.  Id.  Castle & Feijóo, supra note 5, at 45.