Discovery Mode from Spotify

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

If you listened to episode 171 of my podcast with Irene Jalenti, I talked about Spotify’s Discovery Mode app or queue that they announced on November 2, 2020. As I mentioned on my latest episode, this new modality is a engine that will allow musicians and record labels to choose that songs that they want to put out-there.

As per Spotify’s announcement, this new service is a response to artists feedback. Really? Spotify’s press release reads:

Artists tell us they want more opportunities to connect with new listeners, and we believe our recommendations should also be informed by artists—their priorities and what they have to say about their music. And soon, we will roll out a test of a service that gives artists a say in how their music is discovered. 

Do you remember payola? Merriem-Webster defines payola as: a secret or indirect payment (as to a disc jockey) for a commercial favor (as for promoting a particular record).

If you want to read more about payola, check this website here and google Alan Freed’s payola accusation. If you do not want to go into the trouble of doing the search, I will provide the link right here.

In Spotify’s case, they are decreasing or reducing artists’ fee royalty when they sign-in for such new search tool. Could we consider that a new form of payola? Maybe. As an attorney, and this does not constitute a legal opinion, this is a new form of using payola in return of something. A direct reduction of fee in lieu of, possible, more donwloads and/or streaming. It does not matter if this tool mode is available for everyone, still favoring an artist over others. The universe of artists is too great to make this tool work its magic on everyone. The fact that you are willing to reduce your royalty fees in order to get more stream or downloads equals to an unfair competition on a market that is struggling on Covid19 Era.

That is why, US House of Representative, Judiciary Committee issued a letter to Spotify’s CEO, Daniel Eck, to respond to their concerns.

The letter starts stating:

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. 

You can check the full text of the letter right here.

In a nutshell, Judiciary Committee members requested Mr. Daniel Ek to answer five questions or concerns that they raised on such letter. This concerns are quoted ad verbatim below:

  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?

Did Mr. Ek responded to such letter, I do not know. What I know is that I asked US Congressman Mr. Jerry Nadler if Spotify did replied to it with any answer to all previous questions.

If I get a response from Mr. Nadler, I will post it in a follow-up publication.

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