REPORTS: Spotify Faces $1.6 billion Lawsuit Over Song Licensing
Spotify is no stranger to facing lawsuits accusing it of offering unlicensed songs, but the latest could prove to be very costly. Hollywood Reporter has learned that Wixen Music Publishing, which manages the song composition rights for artists ranging from Neil Young to Zach de la Rocha, has sued Spotify for copyright damages of at least $1.6 billion. Wixen claims that the streaming service is using tens of thousands of songs without proper licenses and the compensation to match. The plaintiff had already objected to proposed $43 million settlement in another case in May, so this wasn’t coming entirely out of the blue.
We’ve asked Spotify for comment. However, it hasn’t been sitting idle. The company has questioned whether or not Wixen actually has permission from its artists. It may be allowed to negotiate on behalf of musicians, but that doesn’t mean it’s allowed to sue on their behalf. Spotify could also try an argument it has used in another lawsuit, where it claimed that streaming doesn’t imply distribution or reproduction rights.
There’s a chance lawsuits like this might become moot in the US. A bipartisan House of Representatives bill, the Music Modernization Act, would simplify licensing by putting songs in a public database and granting companies blanket mechanical song licenses tied to market worth. Instead of having to hunt down all the parties involved in licensing a track, Spotify and its rivals would have a one-stop shop. The timing of the lawsuit (December 29th) isn’t coincidental — the Act would clear licensing actions taken before 2018 unless a lawsuit was already in progress. Wixen largely accepts the bill, but felt it had no choice but to sue if it wanted to have any chance of getting the licensing revenue it wants.
A successful lawsuit would be severely damaging to Spotify. It’s still losing money after years of operation, and its entire revenue in the first half of 2017 amounts to $2.2 billion. It would go deep into the red and would likely have to raise subscription fees to have a hope of staying afloat. As such, we’d expect Spotify to fight the case tooth and nail, or at least look for a much smaller settlement.
Hollywood Reporter | This article originally appeared on Engadget.
By Jon Fingas,Engadget Tue, Jan 2 3:10 PM MST
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Spotify faces another copyright lawsuit, from Wixen Music, which represents many prominent artists; suit suggests up to 21% of Spotify songs are unlicensed
Wixen Music Publishing files a new lawsuit that also covers music from Rage Against the Machine, The Doors, Steely Dan and many others.
As the new year begins, the music industry could be set for an epochal moment. Hopes are running high for the first significant reform of music licensing rules in decades. The coming year may also see Spotify go public. But before any of this happens, the Stockholm, Sweden-based streaming giant must now contend with a massive new copyright lawsuit from Wixen Music Publishing, which administers song compositions by Tom Petty, Zach De La Rocha and Tom Morello of Rage Against the Machine, The Black Keys’ Dan Auerbach, Steely Dan’s Donald Fagen, Weezer’s Rivers Cuomo, David Cassidy, Neil Young, Sonic Youth’s Kim Gordon, Stevie Nicks and many others.
On Friday, Wixen Music Publishing filed a lawsuit in California federal court that alleges that Spotify is using Petty’s “Free Fallin’,” the Doors’ “Light My Fire” and tens of thousands of other songs without a license and compensation. The plaintiff is seeking a damages award worth at least $1.6 billion plus injunctive relief.
Wixen’s lawsuit is being revealed here for the first time, but the move will come as hardly a surprise to those who have been paying attention to Spotify’s growing copyright problem.
Last May, Spotify came to a proposed $43 million settlement to resolve a class action from songwriters led by David Lowery and Melissa Ferrick. The plaintiffs in that case had alleged that Spotify hasn’t adequately paid mechanical licenses for song compositions.
Not everyone was satisfied by the settlement, which must still be approved by a judge.
In July, Spotify was hit with two more lawsuits, including one from Bob Gaudio, a songwriter and founding member of the group Frankie Valli and the Four Seasons. Like Lowery and Ferrick, the plaintiffs in these new cases asserted that Spotify hadn’t fully complied with obligations under Section 115 of the U.S. Copyright Act, which provides a compulsory license to make a mechanical reproduction of a musical composition, but only if a “notice of intention” is sent out and payments are made.
With news of more litigation against Spotify circulating, Wixen then made a move in the Ferrick class action case to object to the settlement.
“The Settlement Agreement is procedurally and substantively unfair to Settlement Class Members because it prevents meaningful participation by rights holders and offers them an unfair dollar amount in light of Spotify’s ongoing, willful copyright infringement of their works,” stated the group of Wixen songwriters.
In reaction, Spotify has been questioning whether Wixen has really been authorized by its clients (including Andrew Bird, Kenny Rogers, and Jim Morrison’s heirs) to take its aggressive actions. Songwriters have administrative agreements with Wixen allowing the publisher to negotiate licensing deals, but Spotify has pointed out these agreements are silent about litigation.
In court papers filed on Friday, Spotify’s lawyers also wrote that Wixen “sent a letter to its clients stating that it would submit Requests for Exclusion in their names unless — within a short time frame — the client affirmatively provided Wixen Music with contrary instructions. But that letter does not confer the requisite authority on Wixen Music. In sending the letters, Wixen Music effectively assumed that the recipients’ silence would grant it the power to opt the recipients out of the certified class. But that approach is contrary to law: because the right to opt out of a class action is an individual right, any attempt to exercise that right without express authorization is invalid.”
Before a judge has ruled, Wixen has moved onto taking on Spotify with its own lawsuit.
“Spotify brazenly disregards United States Copyright law and has committed willful, ongoing copyright infringement,” states the complaint. “Wixen notified Spotify that it had neither obtained a direct or compulsory mechanical license for the use of the Works. For these reasons and the foregoing, Wixen is entitled to the maximum statutory relief.”
The complaint (read here) suggests that as much as 21 percent of the 30 million songs on Spotify are unlicensed.
Spotify hasn’t responded to a request for comment. The company may continue to challenge Wixen’s authority or it could attempt the provocative argument that it has been putting forward in the Gaudio lawsuit — that “streaming” implicates neither reproduction nor distribution rights under copyright law.
All this occurs as lawmakers turn their attention to reforming music licensing.
In late December, Rep. Doug Collins (R-Ga.) and Rep. Hakeem Jeffries (D-N.Y.) introduced the Music Modernization Act, which among other things, would end the “notice of intent” process that’s currently spelled out by Section 115. Instead, a database would publicly identify songs and potentially alleviate the way that digital services struggle to identify and locate co-authors of each of the tens of millions of copyrighted musical works. Under the proposal, digital services would fund a Mechanical Licensing Collective that would be granted blanket mechanical licenses. And rates would more closely hew to market value, with songwriters and publishers being granted audit rights.
Among song publishers, optimism for passage of the Music Modernization Act is strong not only because it is a bipartisan approach but, more importantly, because it has earned buy-in from the Digital Media Association, a trade organization that represents big tech players like Apple, YouTube, Amazon and, yes, Spotify.
Of course, the larger hurdle might be getting Congress to care enough about music licensing amid rancor on the budget, immigration, entitlement reform and so on. Will a $1.6 billion lawsuit make enough noise to accomplish this? Stay tuned.
In the meantime, the Music Modernization Act would impact copyright holders suing over mechanical reproduction after Jan. 1, 2018, which helps explain the New Year’s Eve filing.
“We are very disappointed that these services will retroactively get a free pass for actions that were previously illegal unless we actually file suit before Jan. 1, 2018,” said Wixen president Randall Wixen in a statement to The Hollywood Reporter. “Neither we nor our clients are interested in becoming litigants, but we have been faced with a choice of forfeiting rights and damages, or taking action at this time. We regret that this otherwise admirable proposed bill has had this effect, and we hope that Spotify nonetheless comes to the table with a fair and reasonable approach to reaching a resolution with us. We are fully prepared to go as far forward in the courts as required to protect our clients’ rights.”