How do you go from ‘billion-dollar IPO’ to ‘billions in potential damages’? Welcome to Spotify’s fun-filled week.
Should Spotify pay a license to ‘reproduce’ songs on its platform?
That’s now the billion dollar question — if not the ‘billions of dollars’ question. And it’s now the focal point for ten different copyright lawsuits by angry publishers and songwriters.
This all started in late-2015, when cage-rattlers like Audiam’s Jeff Price and David Lowery realized that Spotify wasn’t paying the ‘mechanical’ license. Suddenly, an obscure publishing license was shuttled to the forefront, and Spotify ultimately agreed to out-of-court settlements surpassing $75 million in damages.
But that was just a prelude. Now, the streaming giant is battling an avalanche of lawsuits from pissed-off publishers and songwriters. Just yesterday, a group of several hundred musicians — including Tom Petty and the Black Keys — rejected one of those class actions. The group forcefully argued that $43 million wasn’t nearly enough to cover 7.5 million different song infringements. In fact, it was nearly 100% lower than what they wanted.
But that was just one bombshell. Separately, 7 different publishers added their names to a massive, $365 million lawsuit started in July. The $365 million damages estimate covered the catalogs of two prominent publishers. But now, there are nine of them.
According to details shared this morning, this ‘umbrella’ group of publishers are effectively consolidating several different lawsuits. “They are all listed under one filing, but they are all separate from the other,” one litigant source told us. “For simplicity, they are all under one umbrella.”
Richard Busch of King & Ballow, the attorney leading the actions, told us: “Each [publisher] can act independently.”
Which means that Spotify is effectively battling 10 different copyright lawsuits, with damages potentially crossing $1 billion. And they all stem from one unpaid license.
So who are the new recruits? In the footsteps of Bluewater Music Services and Bob Gaudio, all of these publishers are now actively litigating against Spotify (see filing below). In total, these 7 publishers control more than 230 different songs, representing approximately $35 million in damages.
A4V Digital, Inc.
J&J Ross Co., LLC
Lakshmi Puja Music Ltd.
Lindabet Music Corp.
Music By Shay
Music Of The West
Swinging Door Music
Add litigant Bob Gaudio from Frank Valli and the Four Seasons, and we have 9 separate suits.
And the 10th? That would be Ferrick v. Spotify USA Inc., a class action whose settlement is being disputed by hundreds of musicians and songwriters. This one isn’t looking good: according to our sources, that settlement could be rejected. And Spotify’s low-cost solution deleted. In fact, if the class settlement disintegrates, Spotify could find itself battling dozens of separate suits (with no ‘class’ attached).
(note: big thanks Eriq Gardner of the Hollywood Reporter for helping to clarify that paragraph above)
$365 million + $35 million + ….
Here’s how the math works out. The statutory rate for a single copyright infringement is $150,000. Adding to $35 million to the existing $365 million claims, and we’re talking $400+ million in claimed damages.
Now, if the $43 million class action falls apart, dozens of publishers representing hundreds of songs may file direct actions. That could quickly shuttle damages past $1 billion, according to one knowledgeable estimate. And that’s arguably conservative given the 7.5 millions songs contained — in just one of the class actions.
And what about the major music publishers?
Meanwhile, the largest music publishers have not litigated — and they may never. We’re talking about mega-pubs like Warner/Chappell, Sony/ATV, and Universal Music Publishing Group (UMPG), a group that controls a large majority of revenue-generating copyrights.
So why are they on the sidelines? Earlier, National Music Publishers’ Association (NMPA) president David Israelite told DMN that its major publisher members are happy with their recent settlement. Separately, we’ve heard continued rumors otherwise, though currently, the party line is that the settlement resolved the matter.
Then again, that was before Spotify decided to reverse course completely on its policies towards the mechanical. Indeed, the platform has questioned whether the license applies at all to a streaming service, sparking a declaration of war from Israelite himself.
Meanwhile, publishers and songwriters allege that Spotify patently ignored the issue — for years. “For three years, I’ve been corresponding with [Spotify] regarding this issue,” Audiam founder Jeff Price told Digital Music News this morning. I have hundreds of emails to them about this over multiple catalogs and multiple years. And they just did nothing, and I don’t understand why.”
Audiam is a mechanical collections agency, similar to what ASCAP represents for performance licenses.