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Spotify under fire from US Congress over Discovery Mode royalty policy

Spotify
(Image credit: Spotify)

Music streaming giant Spotify has found itself in hot water with US lawmakers, reports Variety.

Three members of Congress are said to have written to Spotify CEO Daniel Ek, criticising him over the company’s policy of promoting an artist’s music on its Discovery Mode platform in return for a reduced royalty rate.

The letter, dated 26th March and signed by Yvette D. Clarke, Judy Chu and Tony Cardenas, claims that, "choosing to accept reduced royalty payments is a serious risk for musicians".

It continues: "If two competing artists both enroll their newest track in the program, any benefit could be cancelled out, meaning that the only profit goes to your company’s bottom line."

The trio also raise concerns that by offering new artists a "promotional" royalty rate below the "standard" rate, Spotify is effectively shutting out struggling artists who can't afford to subsidise themselves, including those "of diverse backgrounds".

Clarke, Chu and Cardenas describe this a "serious problem". 

Elsewhere, the letter highlights the streaming platform's supposed "lack of transparency" and suggests a possible solution: 

"We would ask that Spotify publish, on a monthly basis, the name of every track enrolled in the program and the royalty discount agreed upon... Without this transparency, you are asking artists to make a blind choice, and it represents a classic prisoner’s dilemma."

Strong stuff. But it probably won't come as a huge shock to Spotify. In July, Congress' Jerry Nadler and Hank Johnson Jr also wrote to Ek, warning that Discovery Mode could trigger a "race to the bottom" among artists willing to accept lower royalty rates in order to be promoted.

To be fair to Spotify, Discovery Mode does have a big upside: it provides independent artists with the opportunity to be promoted on one of the world's best music streaming services without having to pay a single penny upfront. 

In response to the 26th March letter, a Spotify spokesperson told Variety

"Artist and label teams have told Spotify for years that they want more agency in reaching new listeners and driving meaningful connections on our platform – Discovery Mode, in its early phase, delivers just that. We have been transparent about the use of Discovery Mode and the commercial considerations associated with it to our users and partners by publicly discussing this test in many forums and describing its use within the user experience. On the whole, the response to Discovery Mode from our listeners and partners has been incredibly positive."

Whichever side of the fence you fall on, it's perhaps worth noting that  Spotify drives over 16 billion artist "discoveries" a month (when listeners hear music from artists they've not heard from before).

Still no sign of the promised and hotly-anticipated Spotify HiFi though... 

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Tom is a journalist, copywriter and content designer based in the UK. He has written articles for T3, ShortList, The Sun, The Mail on Sunday, The Daily Telegraph, Elle Deco, The Sunday Times, Men's Health, Mr Porter, Oracle and many more (including What Hi-Fi?). His specialities include mobile technology, electric vehicles and video streaming.