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Spotify wants a refund on overpaid royalties to US songwriters, report says

It's trying to make up for a new accounting change to last year's rates.

Spotify

Spotify doesn't like a Copyright Royalty Board ruling, but reportedly wants to use an aspect of it to claim refunds from publishers.

Fabian Sommer/picture alliance via Getty Images

As major music streaming services appeal a royalty rate decision, Spotify is taking things one step further: The world's biggest streaming music service is reportedly seeking a refund for overpayments made to songwriters and publishers last year, Music Business Worldwide reported.

Last year, a royalty rate-setting panel in the US, called the Copyright Royalty Board, ruled that a particular kind of royalty paid to songwriters and publishers should rise 44% or more for 2018 through 2022. The board finalized that rate -- called a mechanical royalty -- earlier this year. Then streaming services like Spotify, Amazon, Google and Pandora appealed the payment increases in March.

Now Spotify is saying it paid too much last year and wants a refund, according to Music Business Worldwide. 

Music royalty rates are the byzantine system that pays your favorite artists and songwriters whenever you stream or buy their music. Royalties are also streaming services' biggest expense by far -- often so large that profitability is out of reach for many services. Recording artists (the people actually performing on your favorite tracks) and labels typically receive the lion's share of royalties, but songwriters (the people who write musical compositions) and publishers get a smaller cut too. 

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The CRB rules say the annual streaming royalty rate for US songwriters and publishers between 2018 and 2022 should be set by choosing the highest outcome of three different models, with one model based on a flat fee per subscriber, Consequence of Sound noted.

But Spotify's student discount and family plan bundles add a layer of complexity. The Copyright Royalty Board's rules say a family plan is be worth 1.5 subscribers per month and a student plan is equal to half a subscriber per month. The family plan lets six people subscribe for $15 a month, while students pay $5 a month. (A regular subscriber pays $10.)

The argument by Spotify seems to be that it didn't take some subscribers into account and overpaid publishers. It's not seeking the 2018 money back immediately, but "offered to extend the recoupment period" until the end of 2019, according to Music Business Worldwide.