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Tensions Intensify between Spotify and Songwriters

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Jul. 1 2019, Published 9:50 a.m. ET

Spotify says it overpaid for song royalties in 2018

Even as Spotify (SPOT) puts some fires out in terms of its relationships with its content suppliers, such as the recent settlement with songwriters over alleged copyright infringements, tensions remain high between the company and its content partners.

According to a report from Music Business Worldwide, Spotify is seeking to recoup millions of dollars’ worth of what it calls overpaid royalties to songwriters and publishers in the US. The report stated that US songwriters and publishers were fuming about Spotify’s move to claw back some of the royalty money it had paid them last year. Spotify has joined Amazon (AMZN), Pandora, and Google in an attempt to block a rule requiring them to raise the royalties they pay to songwriters and publishers.

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Spotify suffers losses as expenses soar

For companies such as Spotify, the cost of licensing songs for their music services is the largest piece of their operating expenses, and the burden can be so huge that they end up seeing losses. Spotify, for instance, posted a loss of $162 million for the first quarter after its operating expenses in the quarter rose 30% YoY (year-over-year) to ~$480 million.

Google parent Alphabet (GOOGL) and Amazon reported profits of $8.3 billion and $3.6 billion, respectively, in the first quarter. But music services are small business for both Google and Amazon. Pandora parent SiriusXM (SIRI) posted a 44% YoY fall in profit to $162 million in the first quarter. Tencent Music’s (TME) profit in the period was $147 million. Spotify owns a stake in Tencent Music alongside Chinese video game and social media giant Tencent (TCEHY).

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