Spotify Is Being Sued For $150 Million Over Unpaid Royalties…

Spotify

Spotify is facing a massive class action lawsuit, with serious allegations of unpaid royalties.  The suit was filed December 28th by musician David Lowery, frontman of bands Camper Van Beethoven and Cracker.  Lowery, who carries a long history of advocating for fair pay for artists, claims that Spotify is distributing copyrighted content while skipping key royalties.  As a result, Lowery is demanding around $150 million in damages for the illegal distribution of his songs.

Lowery alleges that Spotify has caused “substantial harm and injury to the copyright holders.”  In the complaint, Lowery says Spotify has illegally duplicated many of his songs by his band, Cracker, including ‘King of Bakersfield,’ ‘Almond Grove,’ and others.

Sources say that Spotify has set aside $17 to $25 million to pay out to rights holders.  “We are committed to paying songwriters and publishers every penny,” Jonathan Prince, Spotify’s global head of communications said in a statement.  “When rights holders are not immediately clear, we set aside the royalties we owe until we are able to confirm their identities.”

Spotify has faced a lawsuit over copyright infringement before.  Back in 2013, Ministry of Sound sued Spotify for refusing to delete user-created playlists, and more recently Victory Records claimed Spotify was underpaying its artists in deserved royalties.

But there’s more.  Spotify is in the midst of trying to settle with the NMPA after being sued for failing to accurately monitor the payments of royalties.  In a blog post last week, Spotify admitted that it was experiencing difficulties  managing royalty payments. The streaming service vowed to work with the NMPA to build a “comprehensive publishing administration system” to ensure artists and publishers are compensated fairly.

36 Responses

  1. Anonymous

    Annnnnd “King of Bakersfield” has a whopping 1041 views on Youtube on the first video. 289 views on the second.

    Yup. Spotify is causing maaaaaassive losses here. This band is just topping the charts. Adele should be careful. Someone’s about to break her record.

    Seriously. Does anyone like this Lowery guy? Anyone? This is embarrassing and makes everyone in this industry look bad. I don’t even like Spotify. But is there really no other way to settle this other than suing them for $150 million? No wonder outsiders think everyone in this industry is greedy.

    Reply
    • GGG

      Look, as many people on here know I’m a fairly optimistic proponent of streaming, in whatever sense it takes on, and right now the biggest player is Spotify, or maybe Apple, but whatever.

      Anyway, the point is, this isn’t about plays, it’s about a pretty basic aspect of being a third party hosting music. If you can’t secure the rights, don’t put the music up, or be prepared to pay the consequences. Spotify can take half the money they spend on unnecessarily swanky digs around the world and hire more people to sift through the clusterfuck that is rights management. Being a lot of work isn’t an excuse for not securing rights/paying royalties/etc. If I “forget” to pay out to my artists, I could get arrested for embezzling money.

      Reply
  2. FarePlay

    Yes, a lot of people, including myself, like and respect David Lowery. Embarrassing? Greedy? I’m trying to figure out who you’re talking about. Spotify?

    Embarrassing? Well I guess if you’re one of the largest broadcasters / streaming companies on the planet and you don’t have a professional music licensing department you might find that embarrassing or criminal.

    Spotify causing massive losses? Well I don’t know about Cracker and CVB, but I think it would fair to say that the Spotify “model” of offering nearly every song ever recorded for free has caused maaaaaaasive loses for individual artists, not just Lowery’s Bands.

    Frankly, it shouldn’t be up to Lowery or Flo and Eddie or Blake Morgan to have to go after these guys, but unfortunately, nobody else is doing it. We can’t even get you to use your real name.

    Reply
    • Anonymous

      Hey dimbulb: this is a class action lawsuit. It’s not about David Lowery.

      Who’s in charge of writing tech industry propaganda these days? 11 year olds?

      Reply
  3. Anonymous Too

    Don’t be an idiot. He’s talking about Lowery being embarrassing and greedy.

    As he said – and you completely ignored – there was no other way to settle this other than sue? Just dumb.

    Which brings us to:

    “Spotify is currently in the middle of a settlement with the National Music Publishers Association, after being sued for failing to accurately keep track of royalty payments.”

    This statement has been repeated in virtually all of the lazy, cut-n-paste “reporting” of the Lowery lawsuit I’ve seen. Yet, I never heard about this earlier lawsuit by NMPA (or anyone else) against Spotify.

    Does DMN have any details on that?

    Reply
    • Rob

      The NMPA is not suing Spotify. They have been in discussions for some time trying to settle unpaid royalties. They will likely agree on a pool of royalties to be distributed to publishers owed for plays on Spotify and non NMPA members will be able to opt-in to the settlement collect their portion. This was done previously with YouTube and the NMPA, and is the way the mainstream of the publishing industry is handling the very real problem of . Yes, it is an imperfect solution but the industry feels it is better to pressure Spotify into improving their systems (while providing retroactive payment for mistakes of the past) rather than try and sue/shame them. If they cannot come to a settlement, it’s possible a lawsuit could result but from what I hear the talks are extremely positive and constructive thus far and Spotify wants to get this right. They are one of the music industry’s biggest paying customers (despite complaints about low payouts, this is a true statement) and better to coach them into compliance than try to break them.

      As the article above correctly notes, the existence of these talks and possible settlement puts a dent in a strategy to sue Spotify for statutory damages, despite past infringements.

      Reply
      • FarePlay

        So Rob after 5 years of negligent behavior Spotify gets a pass because they want to do better or rather were forced into a corner to clean up their operation.

        Why are businesses on the internet treated to a different standard then non-internet businesses?

        Reply
        • Rob

          they aren’t getting a pass, they are arranging to pay through a collective settlement strategy. The industry is using its leverage as a collective body to pressure them into fixing a very real problem. Collective settlements are not uncommon in business. It is imperfect, but better than litigation in my opinion. If Spotify isn’t willing or able to make a settlement work, then litigation represents the next option to compel them into compliance.

          Reply
        • Rob

          PS: this kind of retroactive correction has been addressed in several other industries including railroads, telecom, automotive. It sometimes takes the form of government regulation stepping in to reign in a new industry from over-reach and other times takes the form of union negotiations to correct long standing gaps in wages or other aspects of labor treatment. The suppliers/market use their power to enact change. Litigation can be a weapon of change in this regard, but best saved for unwilling or unreasonable partners. Spotify appears to be taking responsibility for the problems they have, which I think is a promising start.

          Reply
  4. FarePlay

    A-hole 2. You are the idiot for your failure to recognize sarcasm.

    And naive to think there were other ways. Lowery’s forcing the issue and putting a spotlight on this poorly conceived and executed business,

    Reply
    • FarePlay

      Besides, you didn’t address the most important point. How can one of the largest music streaming services in the world not have a professional music licensing department?

      This isn’t a minor oversight, it is a reckless and willful disregard for basic operational responsibility as it pertains to copyright. What’s your response to that?

      Reply
      • Anonymous

        Do other music services have professional licensing departments? Rhapsody? Google Play? Deezer?

        Reply
        • GGG

          They all do. Or at least one employee who deals with that shit, but most likely a team. You can’t just start a streaming service and have all the music up without figuring out the licensing aspect.

          The issue is it probably needs to be a bigger department. I could write a song with 4 other people, we could each have different publishers, we could each have different PROs, the label owns the master, etc. That’s a lot of places to figure out who gets what money. So to a degree I understand Spotify’s predicament, but again, it’s not really an excuse. People are owed money, regardless of how difficult it is.

          Reply
          • Anonymous

            I agree with you completely…. but my understanding is that the writers and publishers are at least partly at fault. If you want to get paid, you need to provide information about what you own, in what percentage, etc. How is a streaming service supposed to pay parties properly if the parties themselves can’t keep track of who owns what?

            Both streaming services AND publishers/writers are to blame for this mess. And both sides need to stop blaming the other and start putting in the work necessary to fix it.

            Or, you know, just continue as is. That’s working out pretty well.

          • Troglite

            The “data quality” problem Spotify describes is a red herring. The problem is in the sequence of execution. David Lowery’s original post on this topic describes it very clearly:

            “No sorry that’s not how the law works. You have to have a license before you even use the song on a streaming service. That means you have to either contact the owner of the songs and directly negotiate a license. Or you can fall back on a slightly less convenient statutory license (Whereby the federal government compels the songwriter to license at a government set rate). But again, this legally requires the service to send a “Notice of Intent” to the owner stating the service is going to get a statutory license. See this means to be properly licensed you have to know who to pay in advance!”

            So, if Spotify merely secured a license for each song BEFORE they made it available for streaming, there would be no question about who should be paid. By all appearances, the reason Spotify doesn’t know who to pay is a direct result of their decision to allow songs to be streamed before they had secured a license.

          • GGG

            Any label/publisher worth their shit knows who/what they rep. They can’t go in and pull money out of Spotify’s coffers so it’ll be the same issue. Too many people trying to collect from a huge pot of money. If Spotify doesn’t have the manpower, doesn’t matter if they’re figuring it out themselves or every publisher from Sony/ATV down to Joe Schmoe’s LLC for his two albums is calling them up.

  5. Irving Mindreader

    Absent some gold medal legal gymnastics, there are only two possible outcomes of this litigation.

    1) After much wrangling and expense by all, a quiet settlement is reached which pays the lawyers a couple million bucks, pays Lowery et al nothing, and binds Spotify to some nominal iteration in the way they admin content.

    2) Dismissed outright. (The more likely of the two possibilities.)

    The Moral of the Story: The only thing which succumbs to perverse logic is…increasingly perverse logic. There are no mechanicals due. There is only legal smoke and mirrors. And spilled milk.

    This is a money grab disguised as noble intention.

    Say what you will, but Spotify are trying. They spend like a small nation and work like elephants to make a better system from which everyone benefits. Suing them is like suing your Mom because she cracked your ribs while giving you CPR.

    You want more money? Fabulous. Where’s it supposed to come from? The fans have left the building.

    Music can’t magically be worth more just because you throw a tantrum. Value can only stem from improving the fans experience. Audio alone isn’t worth much, and it ain’t Spotify’s fucking fault.

    Spotify is trying to find a solution, and it’s in their interest to do so. Maybe they could get more work done if the rest of you could police fanatics like Lowery from wasting everybody’s time (and money).

    Ask yourself this — What happens if Spotify gives up? I mean, they and Pandora et al have lost *billions* trying to bring the world a music service. What happens if they all just give up?

    Nuclear winter. That’s what.

    You think it’s bad now? Just keep slicing at their tendons. You don’t know what bad is.

    Reply
    • Music Realist

      You’ve got to be joking. You say audio isn’t worth much? Well please explain to me why in the hell Spotify and Apple are making billions of dollars off of audio if it’s not worth much? How stupid are you to say such an ignorant thing. The music industry is only in the shape it is now because of greedy corporations and people who think the way you do.

      Spotify and streaming companies are not trying to make artist more money. They are trying to get richer and have been doing so at the expense of other musicians for quite some time. How can you support that if you are fan, or practitioner of music?

      And you say what happens if Spotify and all the streaming services give up? Easy. More physical music will be sold and people will start to appreciate it more. That’s the only outcome and I wish these streaming giants would give up so we can take back our industry. Greedy business practices have been killing the industry for way too long. But yet people like you act as if the artist who spend hundreds of thousands of $$$$ creating an album should be glad someone is listening to their songs. Yeah right! YOU as LISTENERS should be glad artist are making music for you to listen to. Imagine hoping in your vehicle, riding down the road with no music everywhere you go. Music won’t seem so cheap then will it?

      Ask yourself this, after a big film releases from the theatre, are you able to stream it for free instantly after it becomes available to download or physically purchase? Can you go on Netflix and watch Marvel’s Age Of Ultron the very next day it comes out on Blu-ray? No. Ask yourself why you can’t do this and you will understand why streaming services for music are truly destroying the hottest commodity on earth.

      Reply
      • GGG

        While I more or less agree with your first two paragraphs, the rest is sorta dumb.

        You call yourself Music Realist and you honestly believe taking down streaming will lead to physical sales? Give me a break…haha. Physical was dying long before streaming was remotely popular, because of digital sales. And piracy. You’ve got to kill a few more largely unkillable things before we get back to selling loads of physical.

        As for your last paragraph, yes, you can watch new movies for free the day they come out. Sometimes even before they come out. Not legally, but you can still do it. You must be new to the internet…

        Also, people wrongly equate going the movies with listening to an album. Going to the movies is akin to going to a concert; it’s an experience, and concerts are doing well (if you have fans). Movies and music are very different experiences. People need to stop using them to compare stuff like this.

        Reply
        • Music Realist

          No the rest is fairly accurate. Digital sales and physical sales will go up if streaming stops. They people I know who really enjoy music have huge physical and digital collections and don’t use streaming. Also, nobody is talking about piracy so I don’t know where that came from. You totally missed the point about the film comparison. Sure you can go download a full movie ILLEGALLY before it comes out. But legally you can’t stream every new release on a top streaming service for $9.99 a month. It’s dumb to compare illegal downloads to a streaming service.

          Going to the movies is NOT like going to a concert. Going to see a broadway show or live theatre event is more similar to a concert, but nowhere near the same feeling and energy. The Film and Music industry are similar business wise that’s why I make the comparison. Only thing is we’ve cheapened our industry, they have not. The physical sales of TV shows, Movies and blu rays are still high as ever because they don’t have Moviefy streaming all the big new releases that come out. We have to reach for that same respect or music will keep going downhill. Adele understood that, maybe other artist and labels will catch on too.

          Reply
          • GGG

            As I said before, digital and physical were both dying before Spotify was even a tenth as popular as it is. Look up data, I’m sure it’s on here in the archives. I don’t think you understand how monumentally you’ll have to shift culture to truly get rid of streaming. YouTube is streaming. That will not die. Spotify is streaming. Probably won’t die, but if it does, something, legal or illegal, will just pop up in it’s place. You cannot fight against how literally any aspect of life that exists even partly online is interacted with; i.e. through cloud storage, streaming, paying for access, etc.

            I brought up piracy because how the hell can you have a discussion about the modern music industry, especially as it exists digitally, and not talk about piracy. It’s a massive reason we are where we are to begin with.

            Lastly, I don’t get what’s so hard to understand about this; experiencing a movie, leaving your house for 2 hours, experiencing a thing with a bunch of people…how is that different than what a concert is in the very basic sense? You don’t need to go anywhere to listen to an album. Not to mention DVD watching is a much better comparison to listening to a record.

            Also, please cite where physical sales of movies/TV/etc are still “high as ever.” I googled for 15 seconds and the first articles says otherwise.

          • Music Realist

            In response to GGG.

            I can’t seriously believe you think concerts and movie theatre visits are essentially the same. How is sitting in a fucking dark room while a film is showing, the same as dancing, and signing a long with your favorite artist who is on stage amongst thousands of energetic screaming people the same? In what world can that even be REMOTELY the same dude?

            The top 15 movies of this year sold at least 1 million units each on blu ray (not even counting DVD sales or digital). So yeah I would say sales are still high for physical media in the film world. People will actually go physically BUY media when they can’t stream it on day one. How hard is that to understand? Here’s the link.

            http://www.the-numbers.com/home-market/bluray-sales/2015

            I’m not gonna be the guy who campaigns to shut down the streaming services. But I can almost guarantee from my experience, if something music fans love is not easily available via streaming, they will either digitally buy it, physically buy it, or pirate it. And the majority of users who pirate it and love it, will probably end up buying it sooner or later as well.

            My only point is that the Music Industry that we all are so passionate about, would benefit greatly from artist choosing NOT to stream their albums Day One on these services. If all the top artist in the world chose to come out with records digitally and physically first, I believe we would have a lot more profitable albums in the long run and no matter how much piracy we face, a great album will always sell and do well.

            Regards,

          • Music Realist

            In response to GGG.

            I can’t seriously believe you think concerts and movie theatre visits are essentially the same. How is sitting in a fucking dark room while a film is showing, the same as dancing, and signing a long with your favorite artist who is on stage amongst thousands of energetic screaming people the same? In what world can that even be REMOTELY the same dude?

            The top 15 movies of this year sold at least 1 million units each on blu ray (not even counting DVD sales or digital). So yeah I would say sales are still high for physical media in the film world. People will actually go physically BUY media when they can’t stream it on day one. How hard is that to understand? Here’s the link.

            http://www.the-numbers.com/home-market/bluray-sales/2015

            I’m not gonna be the guy who campaigns to shut down the streaming services. But I can almost guarantee from my experience, if something music fans love is not easily available via streaming, they will either digitally buy it, physically buy it, or pirate it. And the majority of users who pirate it and love it, will probably end up buying it sooner or later as well.

            My only point is that the Music Industry that we all are so passionate about, would benefit greatly from artist choosing NOT to stream their albums Day One on these services. If all the top artist in the world chose to come out with records digitally and physically first, I believe we would have a lot more profitable albums in the long run and no matter how much piracy we face, a great album will always sell and do well.

            Regards,

      • Irving Mindreader

        Music Realist — an odd name, under the circumstances.

        First, please understand, the mind is prone to dissonance. Yours included. It often connects dots it shouldn’t and projects causality where none exists. Suffice, cognitive and subjective bias tend to make people believe the world IS (existentially) what THEY (subjectively) think it is.

        It takes an open mind to contemplate one’s own intellectual blind spots. This is an effort you’ve not yet made evidently, but perhaps I can help.

        You, my dear, are not even remotely a realist. You are a person with a set of opinions that exist in a vacuum, without factual basis. Like visions of sugarplums dancing, or some such.

        Ordinarily, I just skip over discussions like this because arguing science against someone’s flawed worldview is the utmost uphill battle, and usually futile.

        Nevertheless…

        <>

        They are hemorraging money, not making money, and your royalties (however meager) are their runaway #1 expense.
        It isn’t *my* ignorance showing at the moment.
        The music industry was fucked LONG before Spotify. I know. I was there.

        <>

        Wrong. Spotify view artists and rightsholders as constituents who earn ~70% share of revenue, and take it very personally that the system doesn’t generate more money for all concerned.

        Read : http://www.spotifyartists.com/spotify-explained/#how-we-pay-royalties-overview

        <>

        No. The world is digital now. You are shouting into the wind. Physical is niche and forever subordinate market-wise to whatever the most convenient solution is for music delivery to the mobile device. Period. End of story.

        <>

        As GGG already pointed out, you must be new to the internet. I have nothing further to add.

        Reply
        • Music Realist

          First in reply to Irving Mindreader.

          You had me questioning your viewpoint with the “arguing science to people with a worldview” bit because last I checked, science can’t predict album sales, physical sales or any sales for that matter. You can run all the data you want but it means shit in the end because fans are not data to be collected and analyzed. I can’t tell you how many times I’ve heard and SEEN labels shoot themselves in the foot thinking the way you do.

          I’ve been in and around the music industry since I was 14-15 years old. I won’t tell you my age now for privacy sake. But, I’ve sat at the table with the “big boys” and I know how greedy and ignorant business practices has, and still is fucking the industry of music. To many “Smart Guys” showing up at labels trying to predict music based on data and formulas and not understanding, that the FANS know what is genuine, and if they can’t stream what they love, they will go out and buy it physically or digitally. The sale of great music will always prevail or the niche streaming services.

          I would like to ask you, if the streaming services like Apple, Spotify and Pandora ect got shut down (which they likely won’t), where do you think all those subscribers and sales would have to turn to for music? The only remaining choices left for musk listeners would be digital, physical or some form of radio.

          And how hypocritical is it to tell someone they have a set of opinions, but turn around and voice your own set of opinions to them as if your way is the only correct way of thinking? Lol I don’t mind you challenging my view of the industry but be real about it. Music is no place for science.

          Reply
    • Gooey Ventures

      “Suing them is like suing your Mom because she cracked your ribs while giving you CPR.”
      More like giving you CPR under gun-point, after she smashed your head with a hammer.

      Reply
  6. Jeff Robinson

    Our artists or their publishers have never received NOIs from Spotify whereas they have from a majority of the other services. Those letters are typically sent to publishers notifying them that their music will be streamed. Payments typically follow 6 to 12 months later.

    Reply
  7. Name2

    I’m looking forward to Crackerfy.com, where for a low $8.99 a month, I will be able to stream David Lowery’s canon to my heart’s content. I’m looking forward to the innovative customer-facing software, the tech support, the robust 24/7 infrastructure and – OMG! – the social media recommendation and playlist possibilities seem just endless.

    Reply
  8. Adam

    So this stuff is all fairly complicated for most people, like me.

    But a serious questions – why aren’t the labels/distributors who send Spotify this “unlicensed” music being sued as well? It’s not like Spotify goes out and rips a CD into their system. They get uploads from DSPs that contains bad or lacking data.

    Shouldn’t they be the ones responsible??? (At least partly).

    Reply
    • Faza (TCM)

      Technically, yes they should. However, that is between them and Spotify.

      From the point of view of this particular lawsuit, Spotify is the infringing party. They’re the one’s doing the streaming and taking money for it – and not paying the right people the right amounts.

      It is certainly possible that someone misrepresented the situation to Spotify, in which case Spotify should sue them. However, Spotify cannot really hide behind the fact that someone licensed the music to them, unless they can demonstrate that, having performed due diligence, they had a good faith belief that the licensing parties were entitled to license. Based on the statements from Spotify regarding their so-called “Escrow” for royalties they couldn’t forward to the correct parties, this seems to be off the table.

      Fundamentally, the matter – as I understand it – is that Spotify has gone on public record as saying they don’t know who to pay royalties. This means they were using people’s songs without having secured the appropriate licences (if they had, they would know who to pay). Given that Spotify have no statutory right to use music (that I am aware of), they’ve pretty much gone and admitted they are infringing. I seriously doubt there are any safe harbours available for them, so the facts speak for themselves.

      The matter was easy enough to avoid – don’t greenlight a track for play until all the licences (for sound recording and composition/lyrics) are in place. You’d think that with the amount of money they are spending on administration, they’d have a team of people who know what they are doing. Oh, well…

      Reply
  9. I think

    To paraphrase Catch 22: “We have a right to do anything you can’t stop us from doing.” That is the TECH business mantra.

    In this case, Lowery is suing to get them to stop making money from works under copyright without getting a license first.

    And what about the NMPA lawsuit? That lawsuit just validates Lowery’s reason to sue. Spotify might get around to make license payments on works they are streaming…….well maybe…sometime…..they’re working on it but maybe never who knows?

    And the comments about this being a stupid money grab on Lowery’s part, first it’s a class action and second I believe Lowery would be perfectly happy just to get a court ordered accounting of where the money in spotify’s coffers is going

    Reply
  10. Austin

    Great article as always, I can always count on this site to break it down for me.

    Question though. I have never been too clear on mechanical royalties. I was under the impression for quite some time that it was some third kind of royalty (besides sound recording and publishing royalties) that covered some technical aspect of the stream. Can somebody explain it?

    And why are mechanical royalties paid to labels in sales but publishers for streams?

    Reply

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