TV-based music-streaming service Electric Jukebox is ditching its plans to launch in the US for now, citing uncertainty around mechanical royalties due to songwriters.
The UK-based company told Music Ally that the two recent class-action lawsuits filed against Spotify by musicians David Lowery and Melissa Ferrick made it think again about launching in the US.
“This isn’t just Spotify’s problem. This is a problem for every single live, on-demand music-streaming service in the US today that has a full catalogue,” said communications director Tim Hadley.
As Music Ally explained in our recent deep-dive into the Spotify lawsuits, the issue in the US is over songs uploaded to streaming services where the data on who to pay (or even who to license from) on the mechanical rights is missing.
Streaming services can send a “notice of intent” to songwriters or their publishing representatives to use their works, which they can’t say no to. But to send the NOI, they have to know who to send it to.
“We’ve had our lawyers look at it, and the songwriters have a very solid case that they can bring to court,” said Hadley. “We estimate that around 20 million tracks – about two thirds of the catalogue that most of the larger on-demand streaming services in the US now feature – fall into this category, and are thus being infringed by the services.”
Electric Jukebox CEO Rob Lewis told Music Ally that he is unwilling to take the risk of launching in the US, when statutory copyright infringement damages start at $750 per work, and could rise as high as $150k per work.
“Even if you take a fairly optimistic case of a million tracks infringing, and the judge only gives it the minimum [statutory damages] you’re looking at $750m per music service.The nicest way of putting it is that this is a company-changing liability,” said Lewis.
“So for us, the first thing to do is to decouple our US and UK launches. Effectively we’re going for the UK at Easter, then Europe, and then only the US when we know we’ve taken the risks down to a much lower level of risk and financial liability.”
Lewis added that Electric Jukebox thinks that simply removing the 20m unmatched-for-mechanicals tracks, and focusing its playlists on the 10m that remain, would “not be good enough” to launch.
Electric Jukebox, which will stream music to people’s televisions via a dedicated set-top box, was announced in October 2015, originally with the aim of launching in the UK and US by Christmas. In January, it confirmed that the launches had slipped to Easter 2016, and now that will only be the UK.
Critics of the company may see the US delay as an opportunistic move: using the Spotify lawsuits as cover for other, operational reasons why Electric Jukebox isn’t ready for market there.
Lewis disagreed. While admitting that as a hardware-and-service play, Electric Jukebox is “a lot more complicated than launching an app”, he said that the company had been ready to fire the starting gun Stateside.
“We had retail partners ready to go in the US, they were ready to stock it, but we had to make this decision to decouple it,” he said. “There’s no way I’m taking on a liability of that order: it makes much more sense for me to start in the UK, then Europe, and come to the US when we have resolved the situation.”
“We’re going to focus on the markets where there isn’t liability, but we’re disappointed to have let down some of our retail partners.”