Spotify Settles $200 Million Class-Action Lawsuit Against Songwriters (Updated)

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Spotify has now resolved long-standing, $200 million class-action lawsuit from songwriters.  But is this a victory — or money that should have been paid a long, long time ago?

Update 1; May 27th 9:30 am PT.  We’ve now received the entire, 50-page (plus) settlement document, which we will be uploading.  We’ve also received comments from David Lowery and attorneys working with Melissa Ferrick.  The resolution was made by Ferrick’s attorneys, who led the consolidated action. 

It was a long, hard-fought battle.  But litigating songwriters now have $43.4 million dollars in a giant pot.  The only problem: someone must actually claim it.

According to details confirmed to Digital Music News through court documents, Spotify has now agreed to ‘pay’ a $43.4 million settlement amount.  That amount will theoretically cover a massive pile of unpaid mechanical licenses, which Spotify conveniently forgot to pay.

Mechanical licenses are a specific type of publishing license.  They cover the specific act of reproducing a work, and were the centerpiece of this (and other) legal actions for non-payment by Spotify.

Once approved, the $43.4 million tranche will be placed in escrow.  Metadata matches will verify ownership claims, subject to third-party approval.  Then, proper matches will result in payments.

The settlement is a far cry from $200 million, but it’s a resolution that clears the path towards a Wall Street IPO.

All of which sounds like a perfect resolution for Spotify.  By forging this settlement, the company avoids potentially draconian penalties for copyright infringement.  But smartly, Spotify will hold the funds and disperse payouts as needed.  In the end, it’s entirely unclear how many writers and publishers will actually match and claim payments.

Artist activist David Lowery started the contentious class action.   Shortly thereafter, singer-songwriter Melissa Ferrick rattled the cage by sponsoring a similar action.  Lowery initially launched a $150 million lawsuit, while Ferrick filed a similar class action seeking $200 million.  The rival suits eventually combined, with Ferrick’s attorneys taking the lead.

Spotify attorneys continuously attempted to derail the class actions.  Those derailments involved a cozy handshake settlement with the largest publishers.  Those publishers, represented by the National Music Publishers’ Association (NMPA), forged a $30 million payout tranche that absolved serious oversights by NMPA-owned Harry Fox Agency.  Most importantly, the settlement also required any participating songwriter or publisher to waive all rights to future litigation.

All of which seemed to deflate the Lowery-driven class-action.  But the class-action soldiered onward, with a sizable group refusing to settle. Ultimately, that group was only able to wrestle a diminished reward.  But hey, $43.4 million is a lot better than $0.

A court must now formally approve the settlement.