Spotify uses webcast statutory for mobile app radio service, but keeps library limited

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Issue Date: 
Sep 26 2012 - 2:40pm

From Issue:

We've seen several of the on-demand music subscription services add "lean-back" radio style streams to their offerings. Not only does it give listeners a familiar and effortless music enjoyment and discovery experience, it can be cheaper for the services to use the music.

Spotify is reducing its royalty obligation in the U.S. by paying copyright owners per the "statutory" webcasting rates established by the U.S. Copyright Office for the free Internet radio service on its mobile app, reports

("The radio service on the on-demand desktop app does not take advantage of the statutory license -- it's more of an on-demand radio service than a Pandora-like, non-interactive radio service," reports Billboard.)

Another advantage of the webcast statutory license is that it applies to any released music. "Hold out" artists like the Beatles and AC/DC can't deny webcast services the right to perform their music, as they can with on-demand services.

Interestingly, for the non-interactive webcast service, Spotify says it will stick with the same catalog used by the on-demand feature. Billboard suggests, "Spotify could have a poor user experience if different songs were available on different parts of its service."

On-demand services in the U.S. need to establish agreements with the copyright owners for each piece of music played. Copyright owners (record labels), which view these services as "substitutional" for record purchasing, command a high royalty (and in many cases, equity) for the on-demand use of their music. But for Internet radio, where listeners can't build playlists song-by-song or pick the exact tune to play next, things are simpler. Webcasters need only abide by the "statutory" terms and rates, and can play any commercially-released music.

"Although Spotify's mobile radio service probably constitutes a very small portion of its overall U.S. traffic -- and an even smaller portion of its global listening -- the statutory license allows it to pay less than half when taking into account both master and publishing rights."

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