Pop Quiz: Getting Paid For Streams On Spotify

By George Howard

Last week we posted a music publishing pop quiz. There was a hypothetical followed by 5 questions, and today I will reveal the answer to the fourth question. The hypothetical is below as a refresher, followed by the question and answer.

A Jazz artist performs her own composition in a club in the United States. In the middle of the song, the guitar player plays a solo. As part of his solo he quotes a fifteen second snippet of The Flintstones theme song.

And the question was…
4.  The song recorded and released by the label is streamed on Spotify. Who gets paid and how?

Here’s the answer:

he first thing to understand in order to answer this question is the distinction between an interactive and a non-interactive stream.  An interactive stream is one that allows the user to pick specific songs, replay them as many times as they like, rewind the song, and, generally, “use” the song as if they have it on their hard drive.  A non-interactive stream, on the other hand, is one that the user has far less control over; the user cannot select a specific song to play, repeat songs once they’ve been played, or rewind songs.  A non-interactive stream is much like what we think of traditional radio as being. In other words, someone else picks the songs, and you, the listener, has very little control over what is played and when.

Spotify falls into the category of interactive streams.  Pandora, would be an example of a company that employs non-interactive streams.

As you can imagine, there are different rules for each.

An interactive stream, as described above, really *is* like having the file on your hard drive. So long as you’re connected to the internet, there’s really no distinction between streaming the song from, for example, Spotify, and owning the song, and having it stored on your hard drive.  Because of this, publishers and labels determined that they should be compensated at a higher level when their copyrighted material (composition or master) was streamed interactively, as opposed to non-interactively.  

In fact, in order for Spotify or other interactive streaming services to be able to stream a copyrighted master at all, they must negotiate a deal with the master holder.  There is no set rate, and this explains why certain artists aren’t available to be streamed.  Additionally, when the song is streamed, the writer must get paid as well.  As we’ve shown in prior answers regarding public performance, the writer will get paid a portion of the fees collected by their PRO (ASCAP, BMI, SESAC), which were paid by Spotify in exchange for the right to publicly perform the writer’s copyrighted material. Additionally, there is a complicated formula that results in the writer getting an additional payment from the interactive streaming service depending on the type of usage (mobile, subscription, ad supported, etc.). 

So, to answer the question based upon our hypothetical, the label who released the Jazz artist’s recording would be paid directly from Spotify for Spotify to have the right to stream the master.  Additionally, the Jazz artist who wrote the song would be paid a fee/royalty from Spotify when the song is streamed, and from the Jazz Artist’s PRO for the public performance when the song is streamed. Similarly, the writer/publisher of the Flintstones theme would be paid in the same way; i.e. a fee/royalty from Spotify, and from their PRO.  

To be very clear: the songwriter/publisher get paid two royalties for an interactive stream.  1. Streaming Performance (through ASCAP/BMI/SESAC, as an example). 2. A mechanical stream paid from the store directly to the publisher or their administrator.
For a non interactive stream the songwriter/publisher would just receive one royalty for Streaming Performance revenue (through ASCAP/BMI/SESAC, as an example).

 

 

Check back Wednesday, August 15th for the answer to the final question, #5:

5.  The song recorded and released by the label is streamed on Pandora. Who gets paid and how?

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George Howard is the Executive Vice President of Wolfgang’s Vault. Wolfgang’s Vault is the parent company of Concert Vault, Paste Magazine, and Daytrotter. Mr. Howard is an Associate Professor of Management at Berklee College of Music