US Congress takes an interest in Spotify Discovery Mode

There may be trouble ahead for Spotify and its ‘Discovery Mode’ feature. That’s the program where artists and labels can select tracks to be promoted in the recommendation algorithms for Spotify’s radio and autoplay features, in return for a lower royalty rate.

It was announced in November 2020 with a test for artists and labels in the US. Now it’s attracting attention from the US Congress, and not of the positive kind for Spotify. Representatives Jerry Nadler and Hank Johnson Jr have written to CEO Daniel Ek with some pointed questions on the feature, and its planned use in the future.

They express concern that Discovery Mode could “set in motion a ‘race to the bottom’ in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment”.

Discovery Mode has already faced criticism, with some artists labelling it the streaming equivalent of radio payola, and the European Composer and Songwriter Alliance (Ecsa) attacking it as “profound disrespect” to musicians. For its part, Spotify has presented the program in a positive light, saying in its recent ‘Stream On’ event that it has seen participating labels “grow streams by 30%, resulting in higher royalty payments for artists opted into the test”.

Nadler and Johnson’s letter gets to the heart of concerns about where this might lead if everyone signs up. “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,” they suggested.

Spotify has until 16 June to answer five questions posed in the letter. They are: whether it plans to make the pilot permanent, and if so when; what safeguards it has in place to ensure that “a large volume of boosts… do not end up cancelling each other out or otherwise resulting in a race to the bottom”; how it is calculating the reduced royalty rate and whether it is the same for all artists and labels; how those artists and labels will be able to measure the impact of Discovery Mode on their streams; and whether they’ll be compensated if they *don’t* get more streams from taking part in it.

Spotify’s answers should make for interesting reading. Remember, Discovery Mode is a test, and one that the company could end at any time. That’s a similar setup to the direct artist uploads tool that it launched in September 2018, then shut down in July 2019 in what it’s fair to call a diplomatic move for its relations with major labels.

If Discovery Mode creates similar headaches with politicians and regulators, it wouldn’t be a shock to see it meeting the same fate. But let’s wait for Spotify’s answers to this week’s letter: they’ll give us a sense of how committed the company is to its program, as well as what its defence is for the crucial ‘if everyone does this, isn’t the stream-boost aspect cancelled out?’ concern.