Spotify and Digital Music Providers Fight to Retain Phono IV Terms Through 2032
Major digital service providers, including Spotify and Apple Music, are pushing to keep the existing Phonorecords IV royalty terms in place through 2032.
Copyright Royalty Board Proceeding Stirs Debate Over Bundling and Rates
The high-stakes Phonorecords V rate-setting proceeding covers statutory rates for on-demand streaming, physical formats, and permanent downloads. Participating copyright owners previously proposed a simplified mechanical structure designed to eliminate the bundling loophole. In response, Digital Media Association members, including Spotify, Apple Music, and Pandora, laid out counter-proposals in filings spanning hundreds of pages. The streaming platforms advocate for adopting the current headline rate of 15.35% of applicable service provider revenue for the entire half-decade stretch from 2028 to 2032.
Spotify’s submission omits references to annual inflation adjustments sought by groups like Word Collections and the Songwriters Guild of America. Instead, the streaming company defends the bundling provision established under Phono IV. This provision permits services to unilaterally reclassify multi-product subscriptions as bundles, generating mechanical royalty savings. Spotify’s filing emphasizes that copyright owners secured the highest headline statutory mechanical royalty rate in streaming history under the Phono IV agreement.
Intensive Negotiations Shaped the Phono IV Settlement
Spotify argues that the disputed bundle terms were not accidental additions but the result of rigorous, arms-length bargaining involving entities such as the National Music Publishers’ Association. According to Spotify’s Phono V comments, The bundle terms and economics in particular were a known, core term of the Phonorecords IV settlement.
The streaming service maintains that copyright owners pushed for improved bundle terms throughout prior litigation before accepting the final agreement alongside the headline rate.
While the major streaming services align on supporting a flat 15.35% headline rate, individual submissions introduce distinct proposals. Pandora is seeking four modifications, including late-fee adjustments that could require the Mechanical Licensing Collective to issue refunds for overpayments. Pandora also requests the removal of app-store fees from royalty calculations and the exclusion of fake-stream accounts.
Frequently Asked Questions About the Phono V Proceeding
What is the headline mechanical royalty rate proposed by streaming services for Phono V?
Streaming platforms, including Spotify and Apple Music, propose maintaining a flat headline rate of 15.35% of applicable service provider revenue for the entire 2028 to 2032 period.
Which organizations are pushing for annual inflation adjustments?
Word Collections and the Songwriters Guild of America are among the groups seeking annual inflation adjustments in the Phonorecords V proceeding, a modification excluded from the digital service providers’ proposals.
What specific changes is Pandora seeking from the Mechanical Licensing Collective?
Pandora is asking for late-fee changes that would compel the Mechanical Licensing Collective to return overpayments, the exclusion of fake-stream accounts, and the removal of app-store fees from royalty calculations.
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