Spotify faces US judicial inquiry over controversial Discovery Mode

Spotify is facing an official US congressional inquiry over its controversial Discovery Mode.

The ‘pay-to-play’ feature, which was launched last year to considerable industry backlash, allows artists and labels to promote their music on Spotify and receive higher visibility and algorithmic playlisting in exchange for a decreased royalty rate.

Now, as detailed by The Hollywood Reporter, the streaming service has been sent a letter from US Congress asking it to provide more information on the feature.

Addressing the letter to Spotify CEO Daniel Ek, house judiciary committee chairman rep. Jerry Nadler and subcommittee on courts, intellectual property, and the internet chairman rep. Hank Johnson Jr. pointed out that Spotify’s royalty payments to artists are already at a considerably low level, and outlined their concerns over the potential to start a ‘race to the bottom’ among labels and artists.

“Depending on how the program is implemented, there is a further concern that accepting lower rates for this boost in Spotify’s algorithm may not even guarantee more airplay if virtually all commercial artists are also doing the same,” the letter reads.

“At a time when the global pandemic has devastated incomes for musicians and other performers, without a clear path back to pre-pandemic levels, any plan that could ultimately lead to further cut pay for working artists and ultimately potentially less consumer choice raises significant policy issues. 

“This is particularly true under Spotify’s current model, where artists’ returns are already low, with Spotify reporting to pay artists less than a cent per song streamed (estimated in the $.003 to $.005 range) and Spotify has challenged an administrative ruling setting a higher royalty rate for songwriters.”

The letter, which can be read in full via The Hollywood Reporter, also lists a number of questions from Nadler and Johnson regarding Discovery Mode, particularly pertaining to the duration of the feature, how it calculates its reduced royalty rate and what processes are put in place to prevent artists being negatively impacted by the service.

Spotify has been instructed to respond to Congress’ letter by June 16.

Spotify’s local operation declined to comment.