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As parents, industry regulators and anyone whose mouth runs away with them in tense pub situations know, the trouble with making threats is that sometimes you have to go through with them. The latest example is Spotify and its service in Uruguay.

In October, Spotify warned that it might have to shut down in Uruguay if a new budget bill became law.

The bill would introduce ‘equitable remuneration’ for musicians, but in its form at the time did not make it clear whether a.) it applied to music streaming services, and b.) whether the increased royalties for musicians would come out of the streaming services’ share or the rightsholders’.

Well, it’s November now; the budget bill has been passed; and Spotify says there is still not the clarity it was seeking. So it is following through on its threat – albeit with a bit more time for any changes to persuade it to stay.

“Without clarity on the changes to music copyright laws included in the 2023 Rendición de Cuentas law – confirming that any additional costs are the responsibility of rights holders – Spotify will unfortunately begin to phase out its service in Uruguay effective January 1, 2024, and fully cease service by February, to the detriment of artists and fans,” said Spotify in a statement.

“Spotify already pays nearly 70% of every dollar it generates from music to the record labels and publishers that own the rights for music, and represent and pay artists and songwriters. Any additional payments would make our business untenable. We are proud to be their largest revenue driver, having contributed more than $40B to date. And because of streaming, the music industry in Uruguay has grown 20% in 2022 alone.”

“We want to continue giving artists the opportunity to connect with listeners, and Uruguayan fans the opportunity to enjoy and be inspired by their music. Changes that could force Spotify to pay twice for the same music would make our business of connecting artists and fans unsustainable, and regrettably leaves us no choice but to stop being available in Uruguay.”

Uruguay was the 53rd biggest recorded-music market in 2022 according to the IFPI. Its revenues grew by 20.2% that year, but only to $13.2m, with streaming accounting for just under two thirds (64.4%) of that.

As we noted at the time of Spotify’s original comments, however, other countries around the world have seen debates on whether equitable remuneration should be introduced or not. Uruguay is an example of what could happen in much bigger markets if it’s not made clear whose share is reduced in order to pay artists more.

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Music Ally's Head of Insight