Spotify Versus Spoken Giants: The Comedy Rift, Explained

Global rights administration firm Spoken Giants has a bone to pick with music streaming service Spotify (NYSE:SPOT). The disagreement has caused Spotify to drop tons of comedian audio from its library in one fell swoop.

Here's why there's a rift between Spoken Giants and Spotify. Will listeners will be able to access their favorite stand-up skits on the Spotify app in the future?

In a swift move, Spotify has taken down hundreds of comedy clips from its platform. The removed audio stems from comedians like Kevin Hart, Jim Gaffigan, and John Mulaney.

The removal is a direct result of a deadlock between Spotify and global rights administration firm Spoken Giants. The two organizations couldn't come to an agreement on rights and royalties for comedy writers. Spotify sent an email to Spoken Giants on Nov. 24 saying that it would remove relevant clips until they could come to an agreement. Spotify has officially made that move.

Spoken Giants is "the first global rights administration company for the owners and creators of Spoken Word copyrights," according to its website.

The disagreement stems from how comedy writers are compensated. As the system stands, comedians receive payment from their label, distributor, and/or digital performance rights organization SoundExchange every time their recording plays via a digital service like Spotify. However, they don't receive writers compensation, even when they wrote the work.

Spoken Giants is fighting for writer royalties for comedy writers. Some comedians, including Tiffany Haddish and Mike Birbiglia, wrote jokes that are getting streamed on Spotify but they aren't receiving the royalties associated with those bits.

Spoken Giants refers to comedy writer royalties as "literary rights." They're dead set on fighting for what they believe comedy writers deserve.

Meanwhile, Spotify responded to the quarrel by saying it paid "significant amounts of money for the content in question, and would love to continue to do so."

The biggest question in Spoken Giants' fight for literary rights is where platforms like Spotify will get the funding for additional royalties.

Comedians aren't the first group to question the royalty payment system. Spotify pays a notoriously low rate per stream, as low as $0.0033 (which requires about 250 streams to earn $1). According to iGroove, Spotify retains 30 percent of revenues with the remaining 70 percent going to songwriters, composers, labels, or distribution rights holders. For the comedy sector, writers have yet to see revenue come their way.

"That comics are not getting paid for their material is mind boggling," said stand-up comic Eddie Pepitone, who didn't realize he wasn't getting literary rights until he signed on to be represented by Spoken Giants in 2020.

Publicly traded Spotify boasts a $44.22 billion market cap, but its enterprise value is estimated to be a few billion dollars lower than that. Its latest earnings report showed an operating profit of $87 million, up substantially from the previous quarter. Operating expenses also decreased, which means that their bottom line is on the up-and-up. For Spoken Giants and comedy writers, there isn't a better time than now to bargain.