As royalty rate troubles are nowadays surrounding major music streaming services, Spotify is also taking action and is reportedly aiming towards a refund for over payments that were made to songwriters and publishers in 2018, according to Music Business Worldwide.
Last year the Copyright Royalty Board ruled that a specific type of royalty paid to songwriters and publishers should rise 44% or more for 2018 through 2022. The rate is called the mechanical royalty and streaming services like Spotify, Amazon, Google, and Pandora followed by appealing the payment increases in March.
The issue is that Spotify says it paid way too much of the rate last year and now asks for a refund, according to Music Business Worldwide.
Music royalty rates system is the one that pays artists and songwriters when you buy their songs or simply stream their music. Moreover, royalties are by far the biggest streaming services expense, so big that it significantly affects profitability for the majority of services.
In the music industry, the artists receive the biggest amount of royalties, while songwriters and publishers get a smaller percentage.
According to CRB, the annual streaming royalty rate for US songwriters and publishers between 2018 and 2022 should be customized by choosing the highest outcome of three different models.
The thing is that Spotify’s student discount and family plan bundles are quite delicate topics, as the Copyright Royalty Board’s rules say a family plan is worth 1.5 subscribers per month while a student plan is worth half a subscriber per month.
Basically, the family subscription benefits 6 people for $15 a month, while students pay $5 a month.
Therefore, Spotify tries to make a point by saying that it didn’t take some subscribers into consideration, while it overpaid publishers.
The company is not expecting its money back right away, but “offered to extend the recoupment period” until the end of 2019, according to Music Business Worldwide.