The Spotify Paradox: How the Creation of a Compulsory License Scheme for Streaming On-Demand Music Services Can Save the Music Industry

Abstract

The digitalization of digital media has repeatedly forced Copyright Law to address cutting edge issues of Law. The Digital Performance in Sound Recordings Act extended compulsory licenses to digitally broadcast media. Notwithstanding the complications intrinsic to this provision, the Act stopped short of creating a compulsory license for interactive and on demand services. Streaming services like Spotify, Rdio and now Google Play All-Access are transforming music distribution. Yet these companies are subject to a rate-hike cliff, whereby labels and copyright owners can license content to upstart distributors for relatively little compensation, only to subsequently raise these rates as distributional platforms begin to become profitable. To combat this phenomenon, a compulsory rate should be extended to interactive digital webcasters, and should be structured so as to incentivize both parties to negotiate for a fair rate, outside of the compulsory one.