September 14, 2017:Spotify mechanical-licensing woes mount with new legal filings

Spotify’s mechanical-licensing problems in the US aren’t easing. In fact, they’re escalating. Hundreds of artists and songwriters have put their names to a legal objection to Spotify’s proposed $43m settlement over mechanicals.

The creators involved include Tom Petty, Zack de la Rocha and Tom Morello from Rage Against The Machine, Rivers Cuomo from Weezer, Kenny Rogers, Kim Gordon from Sonic Youth and Dan Auerbach from the Black Keys – they’re represented by a publisher called Wixen.

Their objection claims that Spotify’s proposed settlement – which falls to $28.7m after legal fees – is “procedurally and substantively unfair”, before doing the maths on Spotify’s 30m-song catalogue.

“If as few as one-quarter of those songs, 7.5 million, were unlicensed then, taking the $28.7 million left in the Settlement Fund after attorneys’ fees are paid and dividing that number by 7.5 million songs, the result is a settlement payment of $3.82 per infringed song. As the Court is well aware, Spotify faces potential liability of up to $150,000 per infringed composition for willful infringement and $30,000 for nonwillful infringement, plus attorneys’ fees.”

This isn’t the only legal development for Spotify this week: it’s now the subject of a third lawsuit from publishers, joining two filed earlier this year by Bluewater Music Services and songwriter Bob Gaudio.

It was those two suits that sparked a legal response from Spotify arguing that it might not have any obligation to pay mechanical royalties, which has in turn got publishers hopping mad – “As long as this is an active argument, we are in a state of war with them,” was NMPA boss David Israelite’s latest comments on that yesterday.

That argument continues, with responses filed by the plaintiffs this week attacking Spotify for “attempts to advance the knowingly frivolous argument that interactive streaming is a public performance rather than a reproduction and/or distribution requiring a mechanical license”.

A hugely important point to establish, but one – as Billboard pointed out yesterday – which could be a Pyrrhic victory for whichever side prevails, given the knock-on effects.

In any case, Spotify finds itself embroiled in its thorniest licensing row yet; with publishers talking openly about a “state of war” and – as outlined in a separate piece in the Financial Times – with some important discussions ahead with investors like TPG, over how their debt-funding will convert into equity if Spotify chooses to go public without a traditional IPO.

All this shows up some of the recent analysis of Spotify’s licensing-deal renewals with major labels and Merlin as removing the ‘final barriers’ to going public as misguided.

The streaming service has other hurdles to clear, and in the case of the mechanicals dispute in particular, those hurdles are growing taller by the week.

Stuart Dredge
READ MORE: Analysis News
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