More, What the WTF, Spotify!

More, What the WTF, Spotify!

Above: Amelia Fletcher, organizing a postcard-writing campaign to Spotify from the Skep Wax Records office.

 

Ms. Amelia Fletcher is best known for her combos Catenary Wires, Swansea Sound, Heavenly, Marine Research, Tender Trap and soon to be world renown for the record label Skep Wax she helps coordinate. In her real life (where does she find the time?) Ms. Fletcher is an economist, a very good one. According to her biography at the University of East Anglia, "Amelia Fletcher CBE is a Professor of Competition Policy at NBS and Deputy Director at the Centre for Competition Policy. She is also a Non-Executive Director of the Competition and Markets Authority and an editor of the Journal of Competition Law and Economics." The Queen even gave her a medal (that's the "CBE" after her name).

Last autumn, Ms. Fletcher saw her worlds collide when Spotify, the ginormous international music streaming service, announced it was altering it's policy towards compensating songs receiving less than 1000 streams per year. These songs to receive zero compensation from Spotify under the new policy. Amelia Fletcher's trained eye noted a number of discrepancies between this new policy and the stated goals of Spotify. In her role as artist, label owner and as an noted economist whose specialty is competition in the marketplace she wrote an Open Letter to Spotify expressing these concerns in a most articulate and satisfying way. She points out, among other things, the new compensation policy is not just unethical, it is also illegal. One may examine Ms. Fletcher's Open Letter to Spotify HERE.

Ms. Fletcher was kind enough to take a few moments out of her busy schedule to answer queries about her missive and the issues it examines.

 

K News: As an economist who has been involved in the development of digital platforms in the UK and EU, was Spotify's new payment system a surprise to you and your colleagues, or something you considered to be an inevitability?

Amelia Fletcher: Maybe it exhibits huge naivety, but I did actually find it a surprise. Spotify has always trumpeted its support for small and emerging artists and labels and it has previously seemed very determined to stick to its simple pro rata royalty scheme. This new policy seemed to go against the grain.

Another reason I didn’t see it coming is that Spotify has nothing to gain from this change directly. The part of the royalty pot that is not paid out to tracks with low streaming numbers is to be recycled and shared to the other tracks. I had previously been more worried about Spotify seeking to increase its own share of the ‘pie’.
 
Of course, what I did know is that the majors feel they should get a larger share of the ‘pie’ and also that Spotify is hugely reliant on the good auspices of the majors. So in retrospect, it should have been obvious that Ek would try and cook up something along these lines. I see this change as a simple money grab from the majors, one that Spotify may well not have instigated but was unable to resist.

 

K News: Have you received any response from Spotify? What kind of response did you expect from the company?

Amelia Fletcher: I have not received any response, either from Daniel Ek or from the legal compliance team, who I also cc-d. 

What did happen is that they came out very quickly with a statement about the policy, which changed the originally stated rationale. Instead of the policy being all about trying to better “reward real artists”, they instead re-framed it as addressing the issue of “payments lost in the system.”
 
I don’t believe either of these justifications, and the former is frankly offensive. 
 
I’m not sure whether I really expected a response from the company. My main hope with the letter was to trigger sufficient noise about the policy that Spotify would be forced to go back to the majors and say they didn’t feel they could put it through. This hasn’t happened so far, and maybe it won’t, but the noise does still seem to be building. Importantly, I think there has now been enough noise that Spotify is unlikely to raise the threshold any higher than 1000 streams in the future - which is something at least.

 

K News: The Spotify "Time to Play Fair" campaign concerns their dispute with Apple over their non-competitive app practices. Spotify has filed a complaint with the European Commission. Would this body also be the proper jurisdiction for holding Spotify accountable for their unfair and anticompetitive new royalty structure?

Amelia Fletcher: Yes, it is ironic that Spotify have been arguing on the ‘other side’ of this competition case. And actually I am supportive of their position on it!

The European Commission would indeed be one body that could look at the demonetisation issue, and they are aware of my letter. The key question, though, is whether they would want to prioritise it. I fear that the quantum of money at stake means that is unlikely. The fact that Spotify doesn’t profit directly from the policy, and is not making much profit, also makes the case slightly harder to bring under competition law.
An alternative route would be to bring a collective action for damages through the Courts, on behalf of harmed artists/labels. This could be done in the US, UK or EU. I know there are at least a couple of solicitors looking at whether this might be worth trying in the UK. I’m still pondering whether I might join forces with one of them.

 

K News: Has the letter received any response from your fellow economists, either supportive or in opposition?

Amelia Fletcher: I’ve had a lot of support behind the scenes. The only opposition I have had, strangely, has been from a few bigger indie labels, who seem to think the policy is great because it will be good for them. It made me realise that there is a real risk of Spotify successfully engaging in a ‘divide and rule’ approach here. 

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