Emails from 2014 Show Spotify Was Aware of Royalty Payout Problems

The emails follow the abrupt departure of a top Spotify executive.

Hundreds of emails dating back to 2014 indicate that Spotify executives were made aware of mechanical licensing payout problems, including serious issues with contracted partner Harry Fox Agency (HFA), but failed to take action.  Major issues with non-payment of mechanical licenses to artists ultimately led to a pair of class action lawsuits, which have now been combined with an estimated liability of $150 million.

After those lawsuits were filed, Spotify struck an arrangement with the National Music Publishers Association (NMPA), which called for a $5 million penalty, back-payments to songwriters and publishers, and the construction of a database that properly matches songwriters to songs available on Spotify.  It also includes a $25 million fund to compensate writers that make validated claims, though further penalties and artist relations issues could be next.

The private agreement could effectively deflate the class action lawsuit, though sources now tell Digital Music News that the embarrassing (and expensive) situation has prompted the departure of James Duffett-Smith, Spotify’s former Global Head of Publisher Relations, who is leaving next month after a seven-year tenure.

Now, emails to Duffett-Smith, dating back to early 2014, back those claims.  In the email below, from Jeff Price, CEO of Audiam, Duffett-Smith is alerted of pressing non-payment problems related to mechanicals, including issues with Harry Fox Agency (HFA).  Price, a cofounder of digital distributor of Tunecore, started Audiam to better assist and track royalties for artists.

The email, dated July 2, 2015, specifically expresses frustration that no payments, NOIs, or other alerts are being mailed to artists represented by Audiam (the artists’ names themselves are withheld).  The Audiam roster currently includes Jimmy Buffett, Metallica, Bob Dylan, and Jack White, among other superstar-level artists.  Price himself confirmed the veracity of these emails, informing us that hundreds of emails had been sent over a two-year span.

This, for example, was a follow-up to an earlier alert emailed 18 months earlier (in January of 2014).

Importantly, Price confirmed that no action or response was taken by Duffett-Smith or anyone at Spotify, though it’s unclear if work was being done behind the scenes.  At that point, Price is actively threatening action against Spotify, though ultimately, it was David Lowery who initiated the first class action lawsuit against Spotify in late 2015.

The email above follows a long string of emails, including those specifically tied to artist catalogs that were not being paid (names of artists withheld).  This is just one of several emails sent to Duffett-Smith in June of 2015, with no response.  All of the emails contained detailed spreadsheets with exact ISRC codes matched to the songs and plays in question (ISRC codes are a universal code used for identifying and accounting for royalties).

In an email to Digital Music News this morning, Spotify media representative Graham James flatly denied that Duffett-Smith is being pushed out because of the massive mechanical licensing errors.  “James’ departure from Spotify was his own decision after 7 years with the company,” James emailed.  “We were privileged to have had James be a part of Spotify during such a critical time in our development. He will continue to act as an advisor.”

Now, the question is whether the presence of emails dating back more than two years will affect ongoing legislation against Spotify.  The correspondence clearly demonstrates that Spotify was made aware of the situation, and subpoenas of email records could show earlier correspondence.

Meanwhile, Spotify is now expected to announce a replacement for Duffett-Smith, according to sources, largely to mend injured publisher and songwriter relationships.  The executive replacements may also help to reduce legal liability.



9 Responses

  1. Anonymous

    Paul, clearly Spotify was aware of a problem, which is why they have been talking to the NMPA about settling the matter for the last 1.5 years

    • Paul Resnikoff

      The NMPA also mentioned that to me, though that explanation doesn’t quite make sense. If Spotify was so busy arranging this deal, why were they slapped with two separate class action lawsuits, with penalties in the $150mm and $200mm range?

      Why weren’t artists made aware at all of the conversations happening?

      It looks as if the agreements only surfaced after the lawsuits and wave of bad press. I’m not saying anyone is lying about that, but it doesn’t seem like those talks really carried any urgency until the parties absolutely had to act.

      • Anonymous

        They were slapped with lawsuits because certain aggrieved parties think they have a case. Does not mean Spotify was not aware of the problem and working with certain parties to work something out.

        The NMPA has no responsibility to answer to the general artist community. They operate on behalf of their publisher members, all of whom were aware that these talks were ongoing and did not speak of it publicly for obvious reasons.

        The bad press may have prompted some to be more open about what was going on, but it doesn’t change the fact that the talks were going on for a very long time and show, very clearly and uncontroversially, that Spotify knew there was a problem and was doing something about it, even if they weren’t doing something to everyone’s complete satisfaction.

        All this is to say, I just don’t see the story here.

        • lol

          The NMPA has no responsibility to answer to the general artist community.

          but i thought it was *all about the artist*

        • Paul Resnikoff

          I’m glad there are different perspectives coming out here, it allows people to vet through and make their own decisions. Actually, when we broke the story about NMPA and Spotify negotiations, they responded with the same thing, saying effectively, ‘no story here’.

          That doesn’t mean there weren’t discussions, but, the idea that Spotify was urgently trying to get this resolved, yet not responding to hundreds of emails on the matter to a company that handles some of the biggest stars in the world? And then announcing the resolution only after two massive class actions were approved and moving forward, all the details in our reports leaked, etc.? Then pushing (according to our sources) their publisher relations guy?

          Not sure it all stacks up.

          • Anonymous

            Paul, just to be clear, I don’t believe the lawsuits have had their class status certified, so I don’t believe they are “approved and moving forward” as you suggest.

            It’s a shitty situation for Spotify, though I guess I don’t really know what the above emails prove. It looks like one party is saying they were not paid but what if the details of the email are inaccurate?

        • Simon Cowell

          you sound like you work for them – they were not dealing with the issue until irrevocably forced to do so – does not matter a jot either, that they were in talks for 1.5 years with their mates at the NMPA & HFA – they illegally used and infringed upon songwriters rights. thats it! If it were anyone else, we would be in court too. If they are so committed to paying songwriters every penny, how is it they will only pay to those who sign up to their deal and waive their rights to sue???? ha ha – so they have the ability to pay but only if you waive your rights. And if you don’t sign up to their little club they will dissolve MY money to their major publisher mates – unaffected by the non-payment of mechanicals anyway. Basically, the whole NMPA deal is a sham, from closed shop mates all will interests in each other pockets. The NMAP only represents US songwriters for a start and the ‘market share’ they keep banging on about is served by the majors – not the small independents – the fine that spotify is paying is going straight to the majors massive ‘market share’ and screw the small independents as usual. I hope lowery wins – spotify are theives

  2. Anonymous

    “This morning Price himself confirmed to Digital Music News that these emails were sent, informing us that hundreds of emails had been sent over a two-year span.”

    Edited for you, as the sentence as worded was confusing.

  3. Dirty Business

    Why do you think they brought in Troy Carter? That Duffett guys wasn’t doing SHIT. Carter is even hiring a person to heal relationships with pissed off song writers.

    They desperately need to clean up their image.