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Spotify’s decision to hitch its star to podcaster and font-of-COVID-misinformation Joe Rogan has sparked a wave of pushback from musicians, some of whom--among them Neil Young, India Arie, and Joni Mitchell--have pulled their music from Spotify in protest. Spotify, for its part, has stood firmly by Rogan.
That Spotify would stand by a show that consistently undermines vaccines and blithely spreads misinformation is disappointing--but, financially, it’s perfectly predictable.
The short version:
The law and economics of music streaming lead to one inevitable result: Spotify pays money when it streams music. It makes money when it streams podcasts. Therefore, Spotify has an incentive to keep people using Spotify -- just not for music.
The legal regime around music licensing makes breaking even -- let alone turning a profit -- nearly impossible. Because the industry is notoriously secretive about its financials (a problem in and of itself), raw data is hard to come by. But the fact remains that investors (and industry observers) agree that music streaming as a loss-leader -- something that incurs a net loss for the service doing it, in the hopes of potentially looping consumers into the parent company’s product ecosystem. Apple Music and Amazon Music, the second and third largest streaming services by market share, both operate at a loss. Spotify, which has been in the US market since 2011, turned its first profit in 2021. It is still unclear whether it will manage to repeat the achievement.
In short, experience indicates that a streaming service that plays only music will consistently lose money. And while this is a complex issue with many moving parts, one of the biggest is the law -- the market it creates, and the behavior it incentivizes.
But First, How Does Music Copyright Work?
Each track involves not one, but two copyrighted works; the recorded performance (the “sound recording”), and the underlying composition (the “musical work”). Legally, these are two distinct things. This is partly a historical artifact; songwriting hit its stride in the very early 20th century, before mass distribution of recorded music was even a glimmer in anyone’s eye. Compositions got copyright protection in 1906 (and were thus given the now-confusingly-vague designation of “musical work”). Over the first half of the century, publishers and performing rights organizations sprang up to promote, distribute, and license songwriters’ work. It wasn’t until mid-century that the recording industry began to flourish on its own, and sound recordings didn’t even gain copyright protection until the late 1970s.
Because of this history, the two industries – songwriting and recording – operate under wildly different licensing structures. Copyright is, at its core, a government-granted right to exclude; when one player starts to accumulate a high volume of those rights, the risk of abusive market behavior rises. The composition side of the equation messed around and found out early. By the 1940s, the government had intervened and set up a complex system of antitrust enforcement, rate-setting, and mandatory licensing regimes. The result was a market that, for all its faults, remains relatively stable and predictable for licensees (and, as a side benefit, provides some transparency on how songwriters are paid).
The recording industry, by contrast, gained its copyright (and thus its monopoly power) in the mid 1970s. By then, antitrust law was in the middle of a Chicago school backlash that considerably narrowed its scope and purpose and regulators had lost the taste for the kind of vigorous enforcement that marked the early part of the 20th century. While regulators in the 1940s were willing to go after the songwriting industry’s bad behavior (cartels, extractive pricing, strong arm tactics, etc) their counterparts in the late 1970s were less enthusiastic. And so, unlike their composition-side brothers, labels exist in an unconstrained free market.
Why It’s So Hard For Streaming Services to Make Money
As mentioned above, we have very little hard and fast data about how much labels are charging and what kinds of side deals they are striking to extract value from these services. But given what we do know about the industry -- and what the U.S. government has outright assumed is going on when doing things like setting royalty rates -- we have a pretty good idea.
Because labels have no meaningful guardrails on their licensing practices, they are free to maximize their own profit however they see fit. When it comes to streaming, their ideal situation is to extract as much value as possible without forcing the service completely under. This means that licenses are priced with the assumption that the streaming service will have to take on some (ideally sustainable) amount of debt to cover their licensing obligations. The alternatives to this aren’t a whole lot better, either; things like equity stakes, sweetheart deals, and algorithmic preferencing or promotion are commonplace.
The result of all this is that it is structurally impossible for a streaming service to turn a profit using standard music deals alone. Labels are rational economic actors. Profit is value that is not being captured by labels; labels will rationally set prices to ensure that none of that value goes un-captured. Labels have the power to shut a service down simply by walking away from the table.
Why Spotify Can’t Quit Joe Rogan
It means that, despite being a music streaming company, music is (and will always be) a revenue loss for Spotify. To have any hope of turning a profit, it needs a low-cost, high-revenue offering. Enter podcasts – specifically Rogan’s podcast, which commands a minimum ad buy of $1M, along with a commitment to buy other ads on Spotify-hosted podcasts.
So, when forced to choose between retaining portions of its legacy music catalog and keeping one of the only offerings that actually makes the service money, Spotify made the obvious (if morally objectionable) choice. It chose Joe Rogan.
And barring a major overhaul of music licensing law, starting with sound recordings, this will keep happening. We’ll either end up in a world where all mainstream streaming services will be backed by deep-pocketed tech giants (such as Apple, Amazon, and Google), or where music services are stuck relying on non-music content to stay afloat--even when that content is harmful.
Meredith Rose is Senior Policy Counsel at Public Knowledge
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I keep a travel journal and occasionally I even re-read it. One such time was this week, when the ice and wind were whipping about outside my window. I pulled up to the fireplace with a cup of tea and re-lived my French cooking class. Ahh . . . such fond and amusing memories. Plan...
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Protests against police violence erupted around the country following the killing of an unarmed black man, George Floyd, by Minneapolis (MN) police officer Derek Chauvin. Chauvin ended Floyd's life by placing his knee on his neck for nearly nine minutes… and for more than three minutes after another officer informed Chauvin he could no longer detect Floyd's pulse.
The protests continued for months. Some were in solidarity. Others were provoked by recent acts of police violence. Protests in Phoenix, Arizona were nothing out of the ordinary. But the law enforcement response certainly was. It wasn't that the cops did anything that was unusual, per se. They did the normal stuff: they responded violently to protests against police violence, attacking protesters, stripping them of their belongings, and justifying these actions with overblown claims about fearing for their safety.
But it was prosecutors in Maricopa County, Arizona who took things to the next level. Apparently working in conjunction with a number of law enforcement entities, lead prosecutor April Sponsel, an attorney with the Maricopa County Attorney's Office, lied to a grand jury and abused local laws to add gang enhancements to the criminal charges brought against 15 arrested protesters. Sponsel, working with the Phoenix PD, claimed the use of black umbrellas (which protesters used to deflect tear gas canisters and "non-lethal" ammunition) and the acronym "ACAB" ["All Cops Are Bastards"] made the arrested protesters gang members.
This was serious shit. People arrested for rioting, failure to disperse, resisting arrest, or disorderly conduct were being saddled with (completely bullshit) gang charges that had the potential to add another 10 years to their sentences if convicted.
Prosecutor April Sponsel appeared to have been integral to the addition of gang crime sentence enhancements. The wife of a state trooper, Sponsel was the one who presented allegedly false information to a grand jury for the purpose of portraying the arrested protesters as a violent gang, rather than people coincidentally united by their desire to protest police violence. Shortly after the news broke about these bullshit prosecutions, Sponsel was placed on administrative leave while an outside investigation -- requested by Maricopa County prosecutor Allister Adel -- commenced.
Sponsel has been in the public eye for months. And she doesn't appear to like it. She may have enjoyed the backchannel support of local law enforcement as she found ways to stick it to people who were upset with the law enforcement status quo, but she apparently feels litigious about being called out over her gang enhancement bullshit.
April Sponsel, the lead prosecutor who handled the now-dismissed criminal case, filed a lawsuit against Maricopa County Attorney Allister Adel and the county itself in superior court on Friday seeking $10 million.
The Arizona Republic obtained a copy of the lawsuit on Tuesday, which asserts Adel defamed Sponsel in the media, invaded her privacy and caused the county to breach Sponsel’s employment contract.
Inexplicably, the Arizona Republic has decided not to share the obtained copy with readers. Instead, the copy of the lawsuit, embedded below, comes courtesy of Paul Weich, who is running for a position in the Arizona House. He also runs a blog covering area political activity.
Back to the matter at hand: Sponsel is claiming [PDF] the County Attorney defamed her by turning her into a scapegoat for prosecutions that resulted in significant political and public blowback. She claims Adel was fully aware of what was happening and never made any move to alter the course of the prosecution. She also claims she had full support of law enforcement when making the decision to treat the ACAB protesters as a gang. This is unsurprising. But it won't do much to help her win her lawsuit. All it really does is make involved law enforcement members look as petty and ignorant as Sponsel.
For instance:
The claim says she called Phoenix police Sgt. Doug McBride, a gang expert, who agreed the protesters should be classified as a gang on Oct. 20, 2020.
Of course a cop would want this to happen. It was, after all, a protest against law enforcement. If given the opportunity to make anti-police violence protesters suffer, law enforcement officers will opt to do so nearly every time. And it wasn't just this so-called "gang expert." It was every law enforcement agency involved in the arrests.
The lawsuit describes a meeting on Oct. 21, 2020 where “there were more than 30 law enforcement officers in the room, including a number of FBI and Phoenix Police Sergeants, Lieutenants, Commanders and Assistant Chiefs. No one in the meeting was opposed to the criminal street gang charges, and all agreed the charges were appropriate.”
Welcome to the herd and its mentality, April. Surely you were already aware of it. And you must also realize it isn't an adequate defense of your actions, nor does it further the defamation claims being brought against someone who apparently wasn't in the room during this discussion: County Attorney Allister Adel.
Making this battle even more uphill is the fact that an independent judicial review [PDF] of the arrests and prosecutions delivered by an Arizona judge last August contains plenty of evidence Sponsel pushed for gang charges and crafted her prosecution to bring the full pain of these sentence enhancements.
There's a lot in there that points to Sponsel being the person pushing for gang enhancements, over the protests of others. And there's evidence that she moved ahead with a grand jury presentation before a scheduled meeting with the County Attorney's office during which the disposition of these cases was supposed to be discussed.
On Friday October 23, 2020, according to his statement, [Maricopa County Attorney's Office Division Chief] Vince Goddard got a call from April Sponsel informing him there was going to be a press conference at the Phoenix Police Department and they wanted MCAO Allister Adel to attend. The chief of police was also asked and/or was scheduled to attend. He was told this was going to be the “big gang” case that she had talked about in September. Since he only heard about approximately 4 people, he was not sure what she was talking about. He again told her he did not like the “big case theory” where you have limited targets and you charge a large group people. He did not attend the press conference nor did he know if the County Attorney did. No information was provided if a press conference was held.
[...]
During the call with Vince Goddard, the subject of “warrants” was discussed, however, [Chief Deputy County Attorney] Ken Vick assumed he meant search warrants for houses and/or phone records. He was not aware nor was he told a Grand Jury presentation was scheduled for October 27th which would have been before the meeting on October 30th. He provided me the email exchange between Vince Goddard and himself which showed Ken Vick’s surprise and dismay that they had gone to the Grand Jury prior to the meeting.
This is going to make it very difficult to prove Adel was aware of the charges Sponsel was seeking and at least tacitly approved of them by not making any effort to stop her. So is this, from the report released last August:
Based upon the information given to the undersigned, the County Attorney Allister Adel was not briefed on the Grand Jury presentation in this case in the ten (10) days prior to the Grand Jury presentation. CA Adel never got a head's up that the case was going to a Grand Jury nor the charges April Sponsel would be seeking in a draft indictment. The County Attorney did not know a Grand Jury presentation was taking place on October 27th for arrests made on October 17th. The County Attorney was made aware on October 30th about the October 27th Grand Jury Indictment after the media made an inquiry with the office's communication director on Thursday, October 29th. The County Attorney did not attend the ‘incident review” on October 30th since she had been hospitalized on October 28th and she was not discharged until October 31st. This is collaborated by Ken Vick who was not told about the Grand Jury, nor the charges being sought and he did not know what was presented until the day before the October 30th “incident review”.
This lawsuit looks like the flailing of a suddenly toxic prosecutorial asset who thinks she was treated unfairly when the rest of Maricopa County Attorney's Office distanced itself from her and her overzealous prosecutions. The judicial investigation shows Sponsel went a bit rogue, bypassing most of the Attorney's Office to pursue her own vendetta. Unsurprisingly, when it blew up in her face, Allister Adel distanced herself from Sponsel and her actions.
So, this debacle will continue to make headlines for a few more years. No matter how this lawsuit goes, it's not going to rehabilitate Sponsel's image. Win or lose, it's already on the record she was the one that came up with the idea of saddling arrested protesters with gang charges. And she was the one who decided the interests of justice should take a backseat to her vindictive prosecutions.
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