Spotify comes up against the publishing rights of its vast catalog of music in India. This includes numbers like Cardi B, Bruno Mars, as well as Warner's list of composers, totaling more than a million compositions. But if the spat seems to be limited to India, it's actually an indicator of a much bigger fight ahead.
This year, Spotify is expected to renegotiate its global licensing agreements with the three major US music publishers, Warner, Sony and UMG. These agreements include clauses ranging from the advance to income splitting and the most-favored-nation clause, which allows for the modification of important aspects of the contract if another label receives a better offer. Spotify needs these offers to be able to stream the broad bands of music controlled by these labels.
With these negotiations on the horizon, Warner and Spotify are using the launch of the streaming service in India to try to extract concessions from each other for later use. Spotify's CFO Barry McCarthy admitted in an interview this week. "It does not really concern India," McCarthy said at a conference at Morgan Stanley. "It's about leveraging and renegotiating the global deal."
The drama began earlier this week, when Warner "revoked a previously agreed publishing license" for India, according to Spotify, "for reasons totally unrelated to the launch of Spotify in India." Existing global agreements do not cover expansion into new territories, so when Spotify expands its operations to a country like India, it must enter into a separate agreement. Following Warner's withdrawal, Spotify attempted to circumvent a direct label deal by using a controversial amendment to the Indian Act that "broadcasters" may obtain a license for copyrighted works even though the copyright holder refuses the use. In response, Warner fought back with a request for injunction, forcing the case to the Indian court system.
As McCarthy said, "We are fighting for food with Warner. A lot of drama. "
Warner is upset by something that is happening at the negotiating table for its global renewal with Spotify in 2019 and, as a result, has reneged on the license agreement with India to hold the territory hostage as a power game. This may tarnish the first impressions of Spotify in India, as it is launched without the added value of one of the largest music catalogs in the world. It remains to be seen whether restricting this mass of content will affect the number of people who will sign up and pay for Spotify in India, but it seems Warner thinks this will be the case, which will make it easier for Spotify.
Meanwhile, Spotify has made progress with the launch in India, but without the Warner Music publisher Warner / Chappell Music. As Warner seems to hope, the first Spotify users in India were angry and confused by the limited listening options.
If Spotify took him to court, Warner would lose much of his influence and the consequences could be considerable in India. This would set a precedent by which on-demand streaming companies fall within the definition of "broadcaster", leaving an open window for companies like Apple Music, Netflix and Amazon to similarly bypass negotiations in the country to obtain license fees for copyrighted material. Spotify may not use this opportunity, but the additional bargaining power of streaming services on demand could lead to further turbulence in the music industry.
Chances are Spotify and Warner will eventually find a solution, and Warner's registered catalog will reach the Spotify app in India at some point. According to McCarthy, these relationships are an integral part of their business relationship and working together is ultimately in the best interest of both companies. Streaming now accounts for a significant share of label business revenue, and platforms such as Spotify need content from labels to work. But as long as they do not understand on a global scale, music lovers in India will have to deal with the effects, stuck under Spotify without access to the huge catalog of songs Warner / Chappell.
"Our goal is to nurture a long-term constructive relationship with Warner," McCarthy said. "We consider them a partner. From time to time, some of us in our domestic relationships may have quarrels with our partners, but that does not mean we are going to divorce. They pursue their economic interests, we pursue ours … It is in our existential interest for us both to find common ground. [Same] with UMG and Sony. And we will do it. "