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Spotify and Warner are holding India hostage in their global ‘food fight’

Spotify and Warner are holding India hostage in their global ‘food fight’

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“We’re having a food fight with Warner. Lots of drama.”

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Illustration by Alex Castro / The Verge

Spotify is clashing with Warner’s publishing arm over the rights to stream its vast catalog of music in India. This includes every track Warner’s roster of songwriters is credited on, totaling over 1 million compositions. But while the spat appears to be limited to India, it’s actually a proxy for a much bigger fight to come.

This year, Spotify is likely due to renegotiate its global licensing deals with the three big US labels, Warner, Sony, and UMG. These agreements lay out everything from advance money to revenue splits to a Most Favored Nation clause, which makes major aspects of the contract amendable if another label gets a better deal. Spotify needs these deals to ensure that it can stream the large swaths of music controlled by these labels.

With these negotiations on the horizon, Warner and Spotify are using the streaming service’s launch in India to try and extract concessions from each other for later down the line. Spotify’s chief financial officer, Barry McCarthy, admitted as much in an interview this week. “It’s not really about India,” McCarthy said on stage at a Morgan Stanley conference. “It’s about leverage and renegotiation of the global agreement.”

“We’re having a food fight with Warner. Lots of drama.”

The drama started earlier this week, when Warner “revoked a previously agreed-upon publishing license” for India, according to Spotify, “for reasons wholly unrelated to Spotify’s launch in India.” Existing global deals don’t cover expansions into new territories, so when Spotify enters a country like India, it has to make a separate deal. With Warner pulling out, Spotify attempted to side-step a direct deal with the label using a controversial amendment in Indian law, which says “broadcasters” can obtain a license for copyrighted works even if the copyright owner denies use. In response, Warner fired back with a request for an injunction, forcing the case to the Indian court system.

As McCarthy put it, “We’re having a food fight with Warner. Lots of drama.”

Warner is upset with something going on at the negotiating table for its 2019 global renewal with Spotify, and as a result, has reneged on the India licensing agreement to hold the territory hostage as a power play. This has the chance to tarnish Spotify’s first impressions in India, as it launches without the added value of one of the world’s largest music catalogs. It remains to be seen if restricting this large chunk of content will affect how many people sign up and pay for Spotify in India, but it seems Warner thinks it will, and will make Spotify more amenable to reaching a favorable deal.

In the meantime, Spotify has plowed ahead with launching in India, but without the catalog from Warner/Chappell Music, the publishing side of Warner Music. As Warner seems to be hoping, this has left early Spotify users in India miffed and confused with the limited listening options.

Should Spotify win in court, Warner will lose much of its leverage, and the ramifications could be far reaching in India. It would set the precedent that on-demand streaming companies fall under the definition of “broadcaster,” leaving a window open for companies like Apple Music, Netflix, and Amazon to similarly bypass negotiations in the country to obtain the licensing rights for copyrighted material. Spotify may not use this ability, but the added negotiating power on the side of on-demand streaming services could lead to further turmoil for the music industry.

music fans in India are stuck dealing with the effects of this fight

Odds are Spotify and Warner will eventually come to terms, and Warner’s recorded catalog will come to Spotify’s app in India at some point. These rows are a normal part of their business relationship, McCarthy says, and working together is ultimately in both companies’ best interests. Streaming now makes up a significant part of revenue for labels, and platforms like Spotify need content from labels in order to operate. But until they see eye to eye on a global level, it leaves music fans in India to deal with the effects, stuck using Spotify without access to Warner/Chappell’s immense catalog of songs.

“Our goal is to be in a long-term, constructive relationship with Warner,” McCarthy said. “We consider them to be a partner. Occasionally some of us in our domestic relationships might have squabbles with our partners, but it doesn’t mean we’re getting divorced. They’re pursuing their economic interest, we’re pursuing our own … It is in our existential interest for both of us to find common ground. [Same] with UMG and with Sony. And so we will.”