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Spotify defended its podcast deal with Prince Harry and Meghan Markle last week.
Spotify's Chief Legal Officer answered British members of Parliament in a hearing for an inquiry into streaming.
Other celebrities have similar podcast deals, but musicians worry they aren't as fairly compensated.
A Spotify executive appeared before British members of Parliament (MPs) last week amid criticism from musicians who say the streaming giant doesn't pay them fairly while it offers lucrative deals to big names, like Prince Harry and Meghan Markle.
The Duke and Duchess of Sussex have also been criticized by some tabloids for accepting such a high-value deal for their Archewell Audio podcast - the amount has not been disclosed, though ITV News reports it is an estimated $25 million - while artists campaign for fair compensation.
Horacio Gutierrez, Head of Global Affairs and Chief Legal Officer for Spotify, was questioned by MPs on Tuesday as part of an inquiry into streaming economics by the Digital, Culture, Media, and Sport select committee.
The inquiry seeks to "examine what economic impact music streaming is having on artists, record labels and the sustainability of the wider music industry," according to the UK Parliament's website, and "look at the business models operated by platforms such as Spotify, Apple Music, Amazon Music, and Google Play." The website notes that while the UK's music streaming industry brings in $1.4 billion (£1 billion) in revenue, "artists can be paid as little as 13% of the income generated."
Gutierrez did not reveal the amount the company paid the duke and duchess for Archewell Audio, though he confirmed that "they're not doing it for free." Representatives for Spotify and Archewell Audio, respectively, did not reply to Insider's requests for comment.
Spotify has made expensive deals with a number of celebrities
Harry and Markle are not the only high-profile figures to secure a lucrative podcast deal. Spotify also has names like the Obamas, Kim Kardashian West, and comedian Joe Rogan on its roster, yet Harry and Markle appear to have drawn the most ire.
The Sun, for example, recently published an article with the headline: "PRINCELY SUM Meghan Markle and Prince Harry's '£18million' podcast deal defended by Spotify as musicians left 'driving Ubers.'"
While defending the merit of Harry and Markle's deal, Gutierrez told MPs over video chat: "There is a market for certain talent because they command a certain amount of consumption."
"The product is valued on how many users it can attract, how many streams it will attract, which in turn determines how many advertisers are willing to advertise on the podcast," he added.
Gutierrez likened Markle and Harry's podcast to high-production TV shows such as "House of Cards" and "Game of Thrones," which attract users to video streaming services and cable networks where they can then discover productions with smaller budgets.
He claimed that this model benefits music consumption and, in turn, is helpful for musicians whose songs appear on the platform.
A recent Telegraph article - with the headline: "Spotify is foolish to bank on Harry and Meghan for a 'Game of Thrones'-level podcast" - rebutted this idea.
"The streamer pays musicians pennies," The Telegraph's Ed Power wrote. "Then why has it thrown money at two fledgling podcasters promising to 'drive powerful conversations'?"
Many musicians feel let down by streaming services
Tom Gray is a musician in the British band Gomez, and the founder of #BrokenRecord, a campaign calling for regulatory changes to address the "market failure in the digital music streaming business" - which has become more apparent since touring and live music were lost to the pandemic.
Gray told Insider that he loves streaming, but he wants to see it regulated fairly.
"It's less [that] Spotify don't pay artists enough, and more to do with the fact that Spotify's business model is driving down the amount of money over time that they pay to music across the board," Gray said.
He said the calculable stream rate, the total revenue divided by the number of streams, has halved over a decade before inflation. According to Gray, this means that artists with fixed but loyal fanbases have been earning less and less on the platform while their listeners are targeted by big-budget projects like Archewell Audio.
"Spotify is using the audience that they have leveraged through music, in order to capture a huge podcasting market," Gray said. "All of our work is sitting there bringing people into that environment."
But Harry and Markle aren't to blame
Speaking of the criticism Harry and Markle have faced over their podcast deal, Gray suggested this stems more from tabloids than musicians.
"British newspapers and their relationship with Meghan and Harry is very unhealthy. I think anyone who's a neutral observer can see that," Gray said. "People are having a go at Megan and Harry, but actually, the one that really upset musicians was Joe Rogan."
The comedian received a $100 million deal for "The Joe Rogan Experience" podcast, which left some struggling artists, who would need billions of streams to reach this sum, feeling sidelined.
On Tuesday, Gutierrez told MPs that comparing the podcast model to the music side of Spotify was not a useful observation as they have "a completely different set of economics." What sets the music model apart is the role of large record labels such as Universal, Sony, and Warner, which act as a middle-man between artists and streaming platforms.
"We don't get to negotiate directly with artists in the music space in the way we negotiate directly with podcasters," Gutierrez told the committee.
James Burtt, a podcast specialist and founder of Ultimate Podcast Group, told Insider that while it's fair that artists might feel exploited seeing some podcast creators "reaping huge rewards," it is not a like-for-like comparison.
"Unlike with licensed tunes, where a royalty is paid on each stream, podcasts are not subject to the same rules - so whilst Spotify can chuck $100 million at Joe Rogan they won't have to pay him again each time a show is played," he said.
"Harry and Meghan represent a change in tradition - in so many bigger ways than podcasting - and that makes people uncomfortable, so everything they now do is under the microscope," Burtt said.
The podcast expert added that he doesn't think that these large-sum deals are going away anytime soon when there is a clear appetite for them among Spotify's 345 million users.
The problem arguably doesn't lie with high-profile figures like Harry and Markle signing podcast deals with streaming companies. But there is a clear need for regulations within the industry to ensure ethical distribution of income. And with enough artists campaigning for change, streaming platforms are being forced to listen.
This is an opinion column. The thoughts expressed are those of the author(s).
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