House Judiciary Committee questions Spotify about its discovery mode tool – Music Business Worldwide

In November, Spotify unveiled a controversial new tool called ‘Discovery Mode’ that lets artists and record labels identify a track that they want prioritized in listeners’ personalized Auto play or Radio feeds.

By opting in, artists and labels agree to being paid a lower recording royalty rate for streams in those personalized sessions (in Radio and Autoplay).

They can opt out, and when they do, the track will continue to be played in Radio and Autoplay, but it won’t be prioritized and they will then get the standard recording royalty rate for those streams.

In a blog post explaining ‘Discovery Mode’ last year, Spotify called the new tool an “experiment” that will initially only focus on applying recommendations via Discovery Mode to Radio and Autoplay. The company added that it will “carefully test expanding to other personalized areas of Spotify”.

The feature immediately drew criticism from artists when it was announced last year. David Lowery, for example, suggested via a tweet that “This a form of payola or sponsored social media post. It is not necessarily illegal but the tracks would need to be labeled”.

Members of US Congress now also have some questions for Spotify about the feature.

In a letter sent to Spotify boss Daniel Ek last week, House Judiciary Committee Chairman Jerrold Nadler (D-NY) and Subcommittee on Courts, Intellectual Property, and the Internet Chairman Henry C. “Hank” Johnson, Jr. (D-GA) have requested more information about Discovery Mode.

In the letter, the House Judiciary members ask Ek to answer five questions about Discovery Mode, including, if and when the experimental feature will be turned into a permanent program, and “what types of safeguards will be in place to ensure” that a situation doesn’t arise where “the only practical way to get recommended is to accept a reduced royalty”.

They also ask how Spotify plans to calculate the reduced, “promotional” royalty rate and have given Ek until June 16 to respond.

“Core copyright industries like music play an integral role in the U.S. economy, and the vitality of the industry is undermined when artists’ hard work is undervalued.

House Judiciary Committee letter 

Reads the letter: “At a time when the global pandemic has devastated incomes for musicians and other performers, without a clear path back to pre-pandemic levels, any plan that could ultimately lead to further cut pay for working artists and ultimately potentially less consumer choice raises significant policy issues.”

It added: “Core copyright industries like music play an integral role in the U.S. economy, and the vitality of the industry is undermined when artists’ hard work is undervalued.

“Such a race to the bottom threatens to weaken the core goal of copyright and intellectual property – incentivizing creativity by offering a fair return on one’s work.”

You can read the letter in full below:

Dear Mr. Ek,

We write regarding the new “Discovery Mode” feature that Spotify has begun pilot testing on its Radio and Autoplay features. Although public details are limited, Discovery Mode appears to allow artists and record labels to identify particular songs that they would like to prioritize in Spotify’s algorithmic recommendations in exchange for agreeing to be paid a lower, “promotional” royalty rate for those prioritized streams. This may set in motion a “race to the bottom” in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment. Depending on how the program is implemented, there is a further concern that accepting lower rates for this boost in Spotify’s algorithm may not even guarantee more airplay if virtually all commercial artists are also doing the same.

At a time when the global pandemic has devastated incomes for musicians and other performers, without a clear path back to pre-pandemic levels, any plan that could ultimately lead to further cut pay for working artists and ultimately potentially less consumer choice raises significant policy issues. This is particularly true under Spotify’s current model, where artists’ returns are already low, with Spotify reporting to pay artists less than a cent per song streamed (estimated in the $.003 to $.005 range) and Spotify has challenged an administrative ruling setting a higher royalty rate for songwriters. Core copyright industries like music play an integral role in the U.S. economy, and the vitality of the industry is undermined when artists’ hard work is undervalued. Such a race to the bottom threatens to weaken the core goal of copyright and intellectual property—incentivizing creativity by offering a fair return on one’s work.

To better understand the design and proposed implementation of the Discovery Mode tool and the impact that it will have on artists, we ask that you provide additional information in response to the following questions:

1. Does Spotify intend to make this pilot program a permanent one, and if so, when does it anticipate that it will begin?

2. What types of safeguards will be in place to ensure that a large volume of boosts under the Discovery Mode program do not end up cancelling each other out or otherwise resulting in a race to the bottom where the only practical way to get recommended is to accept a reduced royalty?

3. In general, how will Spotify calculate the reduced, “promotional” royalty rate that an artist or record label will need to accept to use the Discovery Mode program? Is this calculation the same for all artists and labels?

4. How will artists and record labels be able to measure the impact of the program on their streams, including which streams are served directly from participating in the Discovery Mode program?

5. What, if any, means of redress will be offered to artists to recover lost royalties in the event that they determine participation in the program has not yielded increased streams?

Thank you for your attention to this matter, and we look forward to your response by no later than June 16, 2021. Should you have any questions in the meantime, please feel free to contact a member of our staff.

Sincerely,Music Business Worldwide