Victory Records Says It Will Begin Layoffs Unless Spotify Restores Its Catalog

Nearly two weeks after Spotify pulled all of his artists’ and songwriters’ music off its service, Victory Records founder Tony Brummel says that unless his label’s catalog is placed back on Spotify soon, he will be forced to begin laying off staff and dropping artists. “They are over 70 percent of our monthly digital sales,” Brummel wrote in an email circulated to undisclosed recipients Friday. “Sorry to curse but in a few months -- I am f---ed.”

Brummel’s emails represent the latest episode in a saga that began in October, when Spotify pulled Victory Records’ catalog of songs off its service in a dispute over unpaid mechanical publishing royalties. According to some back-of-the-envelope math done by Billboard, the amount of money Spotify owes Victory and its publishing operation, Another Victory, comes to about $23,000. But that unpaid sum represents just one of the four kinds of royalties Spotify would pay a company like Victory, which controls the copyrights belonging to both recording artists and their compositions.

In the two weeks that have passed, Victory has had no money come in from Spotify, and according to Brummel, Spotify is also months behind on paying those other royalties as well. "They are going to force me to drop artists and lay off staff," Brummel wrote.

Technical Difficulties

The dispute between Victory and Spotify underscores a broader problem in the world of on-demand streaming, where a whole host of issues, including shoddy metadata and a lack of transparency, have led to publishers and songwriters missing out on as much as 25 percent of the money they are owed for streams on services like Spotify and YouTube.

The problem is systemic, not confined to individual streaming services, publishers or labels, and many services, which outsource the work of paying these royalties to third parties, frame the problem as one outside of their control.

“This is an industrywide problem,” Spotify spokesman Jonathan Prince told International Business Times. “We're working to solve it on a systemwide level, and we look forward to resolving this dispute quickly. We want every songwriter to be paid.”

These shortcomings have become a topic of greater interest as streaming becomes a progressively bigger portion of label revenue, particularly at indie labels. Earlier this year, the CEO of Merlin, a negotiating body that represents independent labels including Victory, revealed that nearly half of Merlin's members collect between 25 and 50 percent of their digital revenues from streaming services.

Reset At Zero?

In Victory’s view, a satisfactory resolution will require more than Spotify simply cutting a check: Its artists’ music must go back onto Spotify, it says, with its historical streaming data intact. If Victory’s music is put back on the service with its stream counts reset at zero, it could affect users’ ability to discover those releases in the future.

Spotify’s service promotes and suggests albums and artists to users in part because of their high play counts; it is far less likely that a fan will be recommended an album like Hawthorne Heights’ “If Only You Were Lonely,” which debuted at number 3 on the Billboard charts when it was released in 2006, without the thousands of streams it had accumulated over the past several years. Spotify has assured Victory that it is capable of restoring its artists’ stream counts to where they were before they were taken off the service.