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.
Paul, – loving the prodigious output today, but you might want to check your facts on this one, “that would be Ferrick v. Spotify USA Inc., a class action whose settlement is being disputed. That dispute is not technically a lawsuit — yet— but it could devolve into a formal action if the class action settlement falls apart.”
What part of that lawsuit isn’t what you would describe as “technically a lawsuit”? It was certainly a lawsuit in your article from earlier today: https://www.digitalmusicnews.com/2017/09/13/musicians-publishers-lawsuit-spotify/
and that snippet from the Court document looks really quite lawsuity.
Just Curious,
Actually that passage was causing confusion with another person (over email), I think I need to further clarify. So, the Ferrick action IS a lawsuit, but Wixen responding (and rejecting it) is not another lawsuit – merely a filing to the original settlement of $43 mm.
Which brings me to this: there’s a very serious chance this entire settlement is rejected – meaning, litigants like Wixen start their own (non class) suits. And others like them.
Am I describing this ok?
Yes – sounds about right. I realized after you posted that you were trying to say that the dispute regarding the settlement isn’t yet a lawsuit. Thanks for the clarification.
Good. However, why aren’t there 100 times this many lawsuits against YouTube and Google for piracy (such as YouTube itself, pirate site extraordinary)?
I remember once that Viacom tried to sue them for copyright infringement, and ultimately failed. What YouTube is doing should be illegal, and they should be sued, but I think there needs to be legislation fixing the holes in the DMCA before a lawsuit could be successful.
Spotify may have a great product per se; but it has never made any profits, and its governance is terrible to say the least. With all these law suits, and others to come – the company will implode and allow the big boys like Apple to dominate the music streaming space.
^^^^ This….
Spotify’s mis-management of what are difficult, but still largely workable issues and problems is appalling.
Huge opportunity for Apple in all of this. I was talking with a songwriter last night, who mentioned that a higher royalty rate (Apple decides to pay more) would play into Apple’s advantage by increasing overhead for Spotify (which is the last thing Spotify needs right now).
An Apple proposal to increase statutory performance + mechanical licenses would:
present Apple as an artist friendly saviour
create a competitive disadvantage for Spotify
Here’s what I don’t understand… Last I heard, Apple was using HFA as their agent for mechanicals. I would suspect that HFA is no better at identifying songs in Apple’s catalog as they are at identifying Spotify’s. I understand they have iTunes as leverage, in that they will only make tracks available for permanent downloads on iTunes if they’re also available as streams on Apple Music. But do they actually have publishing licenses, and are they actually paying royalties to songwriters, for every single song available on the Apple Music service? If they are, that’s wonderful. I also think it’s great they’re paying more than statutory. I’m just curious.
Like virtually every other self-respecting digital service, Apple uses more than just HFA to handle mechanical licensing.
I understand however, that the big difference for Apple is that not only will they only make tracks available for permanent downloads on iTunes if they’re also available as streams on Apple Music, but they force the inverse on mechanical licenses (or at least, liability for them). In other words, any time a label wants a song to be included on iTunes/Apple Music, they have to provide (or at least indemnify for) the mechanical license.
Other digital services don’t have enough clout to force the label to do that for them.
Thanks for this. I can’t help but think there’s a solution to Spotify’s problems somewhere in here. Maybe Spotify doesn’t have the clout that Apple has, but the labels do have some interest in Spotify getting their IPO and not getting sued out of existence beforehand, right? Don’t the major labels have ownership in Spotify? Even if the labels are not willing to provide indemnity, can’t they at least provide Spotify and HFA the information needed to license mechanical publishing rights (at least with respect to any controlled compositions), and the time necessary to license those rights prior to release?
Everyone who has steak on the table needs to come inside the restaurant and settle in . Let the Merger and Acquisition between , Spotify , and the International Capital Markets spin and weave it IPO magic as it quadruplet past the total worth of all the beef. A’ Cartel Consortium ‘ if you will . .: Literati X
Spotify is a thief !!!
Why would you even let people listen to your music for 0.003$ or less in average, when the others are paying so much more!
You can’t listen to the same music forever, it is consumed for a lower price, lower payouts, FUCK SPOTIFY.
If they would get rid of the freemium, I wouldn’t be so much against them.
Spotify is a piece of shit company and Daniel Ek looks like a troll