“Maybe it was naive of us, but we thought we would solve this problem for everybody – and that services, investors in those services and even the entire music industry might welcome that solution…”
David Lowery is feeling positive, three months after he flung the cat into the music-streaming pigeons with his role as the example plaintiff in a proposed class-action lawsuit against Spotify over its publishing licensing.
The $150m lawsuit over the mechanicals element of songwriter royalties was soon joined by a second – a $200m lawsuit – from fellow artist Melissa Ferrick. More followed for other streaming services from musician John Emanuele and his publisher Yesh Music.
Meanwhile, Spotify has announced a settlement with the US National Music Publishers Association (NMPA) to license songs and pay songwriters their missing royalties; and journalists have been hastily brushing up on their knowledge of the ins and outs of US copyright law.
And Lowery? He’s been touring with one of his bands, Cracker, while also teaching students at the University of Georgia. Normal life, in other words, while the licensing debate he ignited – as much with his interviews and posts for creator rights blog The Trichordist as with the lawsuit – rages on.
“It has very little to do with me once it’s in process,” he says. “Most of this was researching my own catalogue, and a couple of other people’s catalogues over the years. I’ve done most of the work I’ve needed to do.”
‘THERE SEEM TO BE A LOT OF QUESTIONS…’
Lowery’s attorneys are now in charge of securing class status for the lawsuit, which may or may not be combined with Ferrick’s lawsuit at some point. Yet he can’t completely disengage from the process, with the NMPA settlement – announced on 17 March – drawing him back into a new round of interviews.
“There seem to be a lot of questions about how these two things interact,” says Lowery, chuckling at the understatement.
The official details of the NMPA / Spotify settlement are that it will enable independent and major publishers to claim unmatched compositions on Spotify and receive backdated royalties for their streams; while also sharing a “bonus compensation fund” set up by the streaming service.
The unofficial reports claim the basic royalties pool is $25m, while the bonus pool is $5m – to be distributed based on the estimated market share of any publisher opting in to the settlement. And, unsurprisingly, opting in is expected to rule publishers out of participating in Lowery or Ferrick’s class-action lawsuits.
Lowery’s attorneys Michelman & Robinson have already had their say, in a guest post for Digital Music News the day before the NMPA settlement was announced – encouraging songwriters to contact them before opting in.
Lowery is careful with his words, but raises one question: that unless the NMPA settlement signs up every single publisher and songwriter, it won’t solve the underlying problem for Spotify. Whereas by its nature, a class-action settlement “would address the whole problem – it’s not piecemeal”.
Which brings us back to the statement in the introduction to this interview, as he elaborates on the NMPA deal: “If people don’t opt into it, if it was the only settlement out there, the infringement liability remains out there on Spotify’s books,” says Lowery.
“That’s why we chose to go the class-action route. Maybe it was naive of us, but we thought we would solve this problem for everybody – and that services, investors in those services and even the entire music industry might welcome that solution.”
‘THERE ARE A LOT MORE SHOES TO DROP HERE’
It’s clear that Spotify and the NMPA will work hard to convince publishers to opt in to their settlement, but Lowery isn’t so sure that they will succeed.
“It’s not like there’s another shoe to drop. There are a lot more shoes to drop here. You know the music industry: we’re a fractious bunch!” he says.
“Even without me being here, not every publisher is aligned with the NMPA. There’s independent publishers and major publishers, and they [the majors] appear to get some kind of a bonus in this settlement.”
That refers to the bonus pool and its division by estimated market share, despite the fact that the larger publishers might be seen as the least likely to have unmatched works on Spotify.
“If that money goes missing from a Warner Music or even a Kobalt, it’s likely to be noticed. It’s more out in the long tail where these royalties are going to be missed,” says Lowery.
With the publishing market much more fragmented than the recorded music industry, it will take some time to gauge how many publishers have opted for the NMPA/Spotify settlement rather than joining one of the class-action lawsuits.
“We actually explored seeing if the National Music Publishers Association wanted to come in to our lawsuit. Nothing came of that: we approached them, but it just didn’t happen,” says Lowery. “Draw your own conclusions there.”
‘IT’S LIKE THE MEDICINE THAT NOBODY WANTS TO TAKE’
Throughout the interview, Lowery returns to his point about the goal of the class-action lawsuits being to sort out the problem of unmatched tracks on streaming services, rather than to enrich their plaintiffs or hurt Spotify.
“I think our approach is much stronger. I think it’s better for everybody. It’s medicine! It’s like the medicine that nobody wants to take, but it’s going to make everybody better,” he says.
“These class actions can create these settlements that solve the big problems like this. We don’t have a functioning legislative body right now – there aren’t going to be any laws passed – and our copyright office doesn’t have any enforcement authority, so there’s really nothing left. You can make a private settlement and that might represent 60% of the songs out there, but…”
That’s another key point about the way the NMPA settlement and class-action lawsuits intersect. Any statutory damages in a class-action settlement will be based not on publisher market share or the popularity of given songs – but rather on the total number of infringements.
“Our thing isn’t so much about the unpaid royalties as it is about the unlicensed songs. The court would assign the penalties – the statutory damages – based on each song, not on its market share. Something that’s spun a lot is the same as, say, an obscure B-side by Teenage Fanclub,” he says.
That means that even if lots of large and medium-sized publishers opt in to the NMPA settlement, there would still be plenty of potential damages in play with the class-action lawsuits. “The NMPA settlement doesn’t necessarily narrow the pool as much as one would think.”
‘GENERALLY IN HISTORY, THAT’S A RECIPE FOR MISCHIEF’
Regardless of the specific outcomes here, Lowery thinks the lawsuits will spark longer-term discussions about the publishing licensing ecosystem, including Harry Fox Agency (HFA) – the former NMPA subsidiary that Spotify hired to deal with mechanical licensing when it launched in the US.
“HFA’s role in all of this is not clear. They can license a lot of songs for streaming, but they can’t license them all. At least with my catalogue, it appears that they’re at least part of the problem,” says Lowery.
He adds that a number of songwriters and independent publishers are keen to see whether HFA is playing a role in the NMPA/Spotify settlement, including the elements relating to publisher audits of the streaming service.
“We asked for a third-party audit [in the class-action lawsuit] – a real third-party audit. I haven’t seen the NMPA settlement, but I see no indication that there is a third-party audit involved,” says Lowery.
“HFA were on both sides of the equation: they were representing the publishers, and they were representing Spotify. Generally in history, that’s a recipe for mischief. A lot of people are going to be uncomfortable if HFA is somehow part of the audit.”
Lowery adds that he feels sympathy for Spotify, as it may have thought that it had the mechanicals headache sorted. However, he also points to another possible solution – proposals a couple of years ago to allow collecting societies ASCAP and BMI to license mechanicals – and notes that Spotify opposed the idea.
“It’s interesting that in Spotify’s comments [published at the time], they talk about this problem – so obviously they were aware of it – but they opposed something that could get them out of this problem, which was to let ASCAP and BMI license mechanicals,” he says.
[Here is the Spotify filing that Lowery is referring to, and the relevant section: “A licensing regime in which public performance rights and mechanical reproduction rights could be obtained from a single source or pursuant to a single license is an interesting idea and could in theory lead to efficiencies. However, the current system where the PROs are subject to regulation via the consent decrees is working well so reform may not be necessary.”)
“I do think after all this is done, there are going to be questions about what exactly happened with the NMPA / HFA and Spotify, and the other streaming services too. I expect this to unravel in interesting ways over the next couple of years,” he says.
‘SO MANY PEOPLE WERE LOOKING THE OTHER WAY’
Lowery is keen to see how Spotify’s plans for a publishing administration system develop, noting that the company could have started work on it earlier, but cautiously welcoming the idea of an accurate database of publishing rights. That said, he sees its pitfalls too.
“If we come out of this with some sort of system, it’ll never be perfectly up to date. New works are created every day, and there will always be musicians and managers who don’t get around to registering them for a while. Even labels! So the database will never be perfect,” he says.
“So two things: we have to have better data, and if our class goes ahead, that will be part of the solution. But people [digital services] will also really need to be able to say ‘We can’t use this track until we figure out how to get a licence for it’.”
That’s another talking point thrown up by the Spotify lawsuits, which Music Ally explored in our earlier analysis of the issue: why streaming services made tracks available for which they didn’t have the necessary publishing data.
One reason: as services raced to gather the most comprehensive catalogues possible, there simply weren’t enough incentives to make them stop in their tracks, and refuse to add unmatched songs.
“The major publishers looked the other way, the copyright office seems to have said they don’t have any enforcement authority. So many people were looking the other way, and you can imagine that if they weren’t, that would have driven a private company to come up with a solution,” he says.
“So the first thing that has to happen is that we need to get the record saying very clearly that you have to license these songs, and then the solutions should follow from there. Right now: ‘Eh! You’re supposed to license the songs’ is effectively what the music business collectively said.”
‘IT’S NOT SINISTER, THERE’S NO CONSPIRACY’
If Spotify gets its publishing database together – and especially if it open sources it for the use of rivals, which has been rumoured – it could be a big moment for music-industry transparency. Although also rather disruptive for anyone within the industry whose business has benefitted from past opacity.
“Whether by design or by accident, there is a certain amount of black-box money throughout the entire music business, and it tends to represent part of our profit margin for these businesses. So they’re not financially incentivised to make that go away,” is how Lowery puts it.
“I don’t think you’ll ever get it to zero, the black-box money. Why would you? Say you were the head of royalties for XYZ Corporation, and four to five percent of your revenue each year couldn’t be matched or assigned.”
“When you tell your shareholders ‘Hey! We’ve figured out how to assign that four to five percent of the revenue, that’s just a recipe for getting fired. It’s not sinister, there’s no conspiracy: it just sinks to the bottom of the pile in the inbox. The incentive is backward.”
Lowery is feeling optimistic that the class-action lawsuits can help nudge the industry forward – “I’m told that we have a really good argument, and a better chance of succeeding than not” – but is more measured about the bigger challenges around artists, streaming and royalties.
‘THE NEXT STEP… IS TO SORT OUT YOUTUBE’
In a month when the RIAA returned to its attack on YouTube and free, on-demand streaming more generally, Lowery is alive to Spotify’s place within the wider streaming market.
“I think free streaming, particularly YouTube: free, ad-supported streaming. This is where we’re missing our money. Everybody’s missing their money there: publishers, labels, producers, songwriters… Whatever part of the ecosystem you’re in, that’s where we’re missing our money,” he says.
“If this [legal process] somehow leads us to the next step, which is to sort out YouTube, that would be the best possible world, right?”
The RIAA made this point with its graphs on the “value gap” between the number of free, ad-supported streams, and the revenues flowing back to the music industry. The gap is increasing: consumption on YouTube in particular continues to rocket, but there are concerns that the service simply can’t sell enough ads to monetise it.
“Last year’s numbers are shocking. YouTube is still growing, and growing so fast. I’m optimistic in a way about getting the streaming services licensed, but we saw this bigger problem out there: is streaming subscription-supported, is it ad-supported?” says Lowery.
“You can’t really fairly address that question without addressing YouTube. I don’t think you can really say to Spotify ‘You have to get rid of free, ad-supported streaming’ while YouTube has free, ad-supported streaming.”
— Blake Morgan (@TheBlakeMorgan) March 17, 2016
‘THE MUSIC INDUSTRY IS A LITTLE BOAT THAT’S TIED TO THIS ICEBERG’
He wants the music industry to talk more about the bigger picture of advertising-supported content – not just attacking Spotify or YouTube, but casting questioning eyes on the ecosystem that is expected to fund their free tiers.
“I’m sceptical that free streaming really ever gets to anything that looks decent. But I don’t know, it may. There are a lot of moving parts in the streaming music world. But just online advertising: the rates keep going down,” says Lowery.
“The music industry is a little boat that’s tied to this iceberg, that’s the entire online advertising ecosystem. And I don’t think that’s healthy right now.”
That argument will continue to bubble this year, while Lowery continues with his recording and touring; with his teaching; and with his online activism through The Trichordist creator-rights blog, and his public appearances.
He’s optimistic that performers and songwriters will continue to make their voices heard in the streaming debates, in contrast to past format shifts, when their influence was minor – with contract and royalties-related shenanigans ensuing.
Lowery praises musician Blake Morgan, who is all over social media with his #IRespectMusic campaign, as well as other artists who have spoken out about streaming.
“Blake’s background is from community, grassroots organising. He knows people like Gloria Steinem! He understands how to organise in that way, and 3-4 people have been effective at doing that,” says Lowery.
“And someone like Rosanne Cash will write something about artist rights and it encourages more people to speak out who before were silent. You see more pro-artist comments on newspaper articles and blogs. I think artists have reversed some of the tide, at least.”