Congressional Open Letter Rips Spotify’s Controversial Discovery Mode, Seeks Financial Transparency – EDM.com

Congressional leaders representing the Multicultural Media Caucus take issue with Spotify’s perceived lack of financial transparency.

In a recent letter dated March 26 and signed by Democratic Representatives Tony Cardenas, Yvette D. Clarke and Judy Chu, the caucus raised concerns that the streaming giant’s controversial Discovery Mode presents artists with a ” prisoner’s dilemma”, in terms of their ability. to monetize on the platform.

Discovery Mode, unveiled in November 2020, is a relatively new feature on the Spotify platform that allows artists to increase the visibility of their songs on the platform in exchange for a lower promotional royalty rate.

As the letter indicates, however, it is possible that, depending on the number of artists opting into Discovery Mode, the theoretical benefit of increased promotion could be negated.

“If two competing artists both sign up their new track for the program, any benefit could be forfeited, meaning the only profit goes to your company’s bottom line,” the letter states. “For artists from diverse backgrounds, who often struggle to access capital, the assumption that they now have to pay to be found by new consumers on Spotify presents a particularly serious problem.”

Like Variety note, the feature has already come under scrutiny from House Judiciary Committee Chairman Jerry Nadler, who along with Rep. Hank Johnson Jr. wrote to Spotify CEO Daniel Ek and expressed concern that Discovery Mode “would spark a ‘race to the bottom’ in which artists and labels feel pressured to accept lower royalties as a necessary means to break through an extremely crowded and competitive music environment.”

The letter ultimately asks Spotify to release a list of tracks entered into discovery mode on a monthly basis along with promotional royalty rates for tracks included in the program.

You can read the full letter below, by Variety.

Dear Mr Ek:

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We are writing to you as co-chairs of the Congressional Multicultural Media Caucus to share our concerns with Spotify’s approach to consumer transparency and disclaimers. Your company’s questionable approach was publicly exposed by a recent scandal and your company’s decision to add “content notice flags” to podcast episodes about the COVID-19 pandemic that include misinformation, like the Joe Rogan podcast.

As you well know, the recent episode led to a confrontation between your company and a number of iconic artists, including Neil Young and India.Arie. The New York Times reported that it was “the latest strain in the company’s complex and often troubled relationship with artists”. We think one of your new music promotion programs, Discovery Mode, is another troubling move by your company that sacrifices honesty in the name of profit.

As reported in the press and on your website, Discovery Mode gives artists and copyright holders an increased push of consumer-listed songs on algorithmic plays, including streams through Spotify’s Radio and Autoplay formats. , in exchange for reduced royalty payments for the platform’s use of these sound recordings. However, we understand that your program is unfair to both artists and consumers because, again, it lacks transparency.

Choosing to accept reduced royalty payments is a serious risk for musicians, who would only benefit if Discovery Mode produced more total streams for an artist across their entire catalog, not just the track covered by the program. And if two competing artists both sign up their new track for the program, any benefit could be nullified, meaning the only profit goes to your company’s bottom line. For artists from diverse backgrounds, who often struggle to access capital, the assumption that they now have to pay to be found by new consumers on Spotify presents a particularly serious problem.

We require Spotify to publish, on a monthly basis, the name of each track entered into the program and the agreed royalty reduction. Without that transparency, you’re asking artists to make a blind choice, and that’s a classic prisoner’s dilemma.

As for consumers, they too deserve transparency. Spotify does not tell consumers that they are listening to paid content when it provides them with songs in discovery mode. We believe there is no meaningful distinction between paying a lower royalty rate and accepting payment for placement on the service. In fact, Spotify tells listeners that its Radio feature offers “continuous music based on your personal tastes and no ads if you’re a Premium member.”

Based on our understanding of the program, this appears to make Discovery Mode a straightforward example of deceptive native advertising, which preys on unwitting consumers, and has been a recent area of ​​enforcement activity by the Federal Trade Commission. The Discovery Mode program appears identical to deceptive native advertising, such as undisclosed promotional tweets from paid social media influencers or poorly described sponsored search results.

We seek information from your company to determine if Discovery Mode violates the fundamental principle of truth in advertising that “it is misleading to mislead consumers about the commercial nature of content.” and visible. iii Among the factors considered under this standard is whether the disclosure is visible and unavoidable, and nothing we see on your website or any interface of your service meets to these criteria. Why isn’t Spotify following these federal guidelines, put in place to protect consumers?

We would appreciate a response to the concerns raised in this letter and the question above to help inform our caucus priorities for the year. We also invite you to join us in promoting a fairer media landscape and, in that spirit, we ask that you seriously ask yourself if Discovery Mode is misleading consumers and undervaluing independent artists.

Sign,

Yvette D. Clarke Judy Chu Tony Cárdenas Congressman Congressman Congressman

Victor L. Jones