Photo Credit: NMPA President & CEO David Israelite
The National Music Publishers’ Association (NMPA) isn’t loving Amazon Music’s Phonorecords V proposal, which it’s criticizing as the “worst” of those submitted by DSPs and an attempt “to squeeze songwriters.”
NMPA head David Israelite took aim at the Amazon-owned streaming platform’s suggested rate framework in a to-the-point video. As we broke down in detail yesterday, though the services’ filings overlap in multiple ways – they certainly aren’t seeking rate hikes – each also covers unique angles and positions.
Enter Amazon Music’s voluminous filing, which, contrasting Spotify’s push to carry over the current headline rate of 15.35% throughout the entire Phono V stretch, is calling for “a modest rate reduction.”
Specifically, the DSP (plus Qobuz, Beatport, and classical streaming app IDAGIO, all of which formally backed the proposal) believes this headline percentage should be 13.4% of eligible service provider revenue between 2028 and 2032.
The way Amazon Music sees the situation, the Phono IV “settlement reflected an intricate series of compromises,” and the rate increases coincided with a well-documented bundles overhaul.
On the well-documented front, that Spotify’s sweeping bundling reclassifications (and mechanical payments decrease) prompted criticism and litigation isn’t a secret.
And when Amazon Music rolled out “a similar bundle – combining its premium music service with audiobooks from Audible,” publishers responded in a way that “robbed Amazon of a key benefit it expected to gain from the Phonorecords IV settlement,” according to the partially redacted text, which also describes “resulting uncertainty and acrimony.”
This leads to another key component of the platform’s Phono V proposal: When it comes to bundled offerings, the CRB judges “should now discard the percent-of-revenue framework altogether.”
“Just as removing the revenue prong solved the disputes about Prime Music’s imputed revenue, removing the revenue prong for Bundled Subscription Offerings would solve the same disputes that now afflict that category too,” the text reads before once again urging “a downward adjustment.”
By the numbers, then, the proposal would cut to the chase and determine the “all-in royalty” for bundled subscription offerings – i.e., existing audiobook and music plans – at 21.3% of the “total content cost” (TCC), down from 24.5%.
From there, performance royalties would be deducted as usual, and the payable royalty pool would be calculated at the higher of this sum (all-in royalty less public performance, that is) multiplied by the relevant offering’s eligible plays figure, or alternatively, the royalty floor.
Unsurprisingly, given the nature of the submission, Amazon Music is rallying for a floor-rate decrease as well, from 33 cents to 29 cents per active subscriber. This is, of course, an overview of the calculations, and there’s a bit more to the process than outlined above.
Additionally, like Pandora, Amazon Music is looking to boot public domain plays and fake-play accounts from the calculations; to dial back the MLC’s “usurious” and “draconian late fees”; and to axe app store commissions from the same calculations.
But the bigger takeaway is that rate reductions are a central part of the service’s proposal, which, via a written testimony from Royalty Compliance Organization co-founder Wayne Coleman, calls on “publishers to charge songwriters less and do more to properly distribute the royalties they already collect.”
Back to Israelite’s response, the NMPA head roundly criticized Amazon Music’s “terrible” proposal.
“Now we know in writing what the major streaming services think songwriters are worth. And today, I can reveal the worst offender. And the winner is – we have an upset – Amazon Music,” Israelite said as he opened an envelope containing a card featuring the appropriate logo.
“The irony is it’s a company with a market cap of $2.8 trillion, with $717 billion in annual revenue,” he continued. “Which makes Amazon 100x the size of the total U.S. publishing and songwriting industry. And they want to squeeze songwriters the most.
“Here’s why their proposal is terrible: They want to significantly decrease your rates across the board, in every category. They want to go backwards from 15.35% of their revenue pool to only 13.4% – less than songwriters were paid a decade ago.
“They also want radical changes to how they define revenue. They want to avoid paying late-fee penalties that the law requires. They want to continue their forced bundling scheme, which was modeled after Spotify’s, that has cost songwriters and publishers more than $1 billion.
“Stay tuned as we break down the other proposals in the coming days,” he finished.
With that, notwithstanding DIMA’s initially professed desire for “a timely resolution,” an ugly, drawn-out battle could already be unfolding, and we’ll continue tracking the high-stakes process from here.
