Tag: Spotify

Spotify Still Wrangling with Songwriter Royalties

On January 8 of this year, The Trichordist ran a story that the Huffington Post apparently rejected in which indie musician Blake Morgan describes a closed-door meeting between Spotify executives and a group of musicians.  According to Morgan, he actually had to explain that Spotify’s “product” is not Spotify itself but music—music that Morgan and his friends make, and which Spotify monetizes.  And that’s fine, even welcome, if the company pays for licenses.

But Spotify has a big—potentially very big—problem when it comes to paying for mechanical licenses, which compensate songwriters and composers for their compositions, regardless of which artist(s) perform the work.  These licenses are required for reproduction under §106(1) or distribution under §106(3) of the Copyright Act; and based on precedent, a streaming service like Spotify is held to both reproduce and distribute musical compositions.

Unfortunately, the company has allegedly failed to pay for mechanicals for thousands of compositions, which is why it currently faces litigation from several complainants with potential damages running into billions of dollars.  Biggest among these is the Wixen Publishing suit, filed on the eve of the Music Modernization Act (now law) first being introduced in committee.  The suit implicates around $1.6 billion in damages for failure to license works by songwriters including Tom Petty, Stevie Nicks, Neil Young, et al.

With such prominent names in the mix, one might think that Spotify’s original defense (i.e. that rights holders are hard to find) would not have held up very well.  And it did not hold up very well, as exemplified by the comparatively modest Lowery/Ferrick class-action suit, which settled in May 2017 for a $43 million fund to various songwriters.   

Then, with the pending Music Modernization Act, which would bring an end to new litigation over failure to obtain mechanicals, late 2017 saw a spate of new complaints against Spotify for its apparently sweeping failure to secure these licenses.  And perhaps it was the extinction-scale degree of the potential damages that then inspired fresh creativity in Spotify’s defenses.

In a September 2017 post, I described the suits filed by Bluewater Music Services and songwriter/musician/producer Robert Gaudio.  In its initial response to this complaint, Spotify implied that, as a streaming platform, it was never obligated to pay for mechanical licenses.  This drew immediate reaction from the National Music Publishers Association and CEO David Israelite’s declaration that the platform was then “in a fight with all songwriters.”

Spotify’s rationale in that brief was that streaming only implicates the right of public performance and not distribution; but as I noted in that post last September, even if a court agreed with this interpretation (and that is a big IF), this would still leave the reproduction right, for which a mechanical license is still required.  This no-license-needed defense remains among Spotify’s arguments in its current filings, but according to a recent article by Eriq Gardner in The Hollywood Reporter, the streaming company has introduced a new theory to the Bluewater case.

Because Bluewater administers copyrights for publisher clients, but is not the owner of those copyrights, Spotify questions whether the company has standing to sue for infringement of the mechanical right for all the titles named in its complaint.  Spotify’s theory turns on the premise that because a) Bluewater is not empowered to license for less than statutory rates without written consent of its publisher clients; and b) because any party can obtain a mechanical license at the statutory rate by filing a Notice of Intention (NOI) with the Copyright Office, then Bluewater’s authority to grant the license is non-exclusive. If that’s the case, Spotify contends, then Bluewater does not have standing to sue for these alleged infringements.

Spotify’s argument hinges substantially on the fact that mechanical licenses are compulsory.  No songwriter/composer can deny any party a mechanical license to use a musical work as written.  On the other hand, these owners can authorize parties like Bluewater to administer those rights on their behalf, so if this reads like a very fine parsing on Spotify’s part, it will be interesting to see whether the court thinks so, too.  In either case, a mechanical licensing after January 2018 is subject to the terms of the MMA, so it seems doubtful that the Sixth Circuit opinion will have substantial effect going forward regardless of how it rules.

It was Devlin Hartline at the Center for the Protection of Intellectual Property (CPIP) who shared this story on Twitter, so I asked his view, and he replied …

“It’s quite noteworthy that Spotify summons no support in the case law for its newfound position that there can be no exclusive licensee of the mechanical rights in a musical work at the statutory rate since there’s no exclusivity given the compulsory license. The compulsory mechanical license has existed since the Copyright Act of 1909. If the argument had any merit, you’d think Spotify would be able to find at least some precedent in support. Instead, this move comes across as another desperate attempt by Spotify to avoid paying for the works that it failed to license properly in the first place.”

Further, Hartline opined in his tweet Spotify counsel Christopher Sprigman’s presentation of this unique defense might be another reason to be concerned about his leading the Restatement on Copyright Law initiative at the American Law Institute.  As described in a January post, some prominent copyright skeptics have pushed for this Restatement project, which is unprecedented in the annals of all statutory law—not just copyright.  As I wrote in that post …

ALI Restatements have never been written for comprehensive federal laws like copyright because these are already statutory, or black-letter, laws.  Congress writes the statutes, the judiciary interprets them, and attorneys make their arguments; but everybody’s working from the same statutes and a much more narrow body of case law than common law entails.   Hence, this request for a Restatement of copyright law represents an end-run around Congress—an effort to reshape the Copyright Act without a legislative process.

Sprigman is counsel for Spotify; he’s the lead Reporter on this ALI Restatement project; and he’s the co-author of a paper called The Second Digital Disruption (see two-part response here), which rather speciously asserts that because market data reduces risk, this obviates the author’s need for strong copyright protections.  Not that I generally like picking on any one individual, but it just so happens that Sprigman’s name seems to feature in a trifecta of the anti-copyright agenda—litigation, policy, and academia—and largely in the service of billion-dollar tech companies like Spotify that don’t even know they’re in the music business.  

Spotify in Songwriters’ Crosshairs Again

In July, two new lawsuits were filed against the streaming service Spotify, alleging willful copyright infringement on a “staggering scale.”  Publisher Bluewater Music Services and songwriter, musician, and producer Robert Gaudio (formerly of The Four Seasons) both accuse the streaming service of infringing the reproduction and distribution rights of songwriters by failing to obtain mechanical licenses for several thousand songs represented by the two complainants combined. 

In late August, Spotify filed a motion with the court alleging that the complainants were treating their service as though it were “a new Napster,” asserting that the complaints are unclear in their allegations, and, therefore, requested a More Definite Statement. Spotify further indicated that they are prepared to defend themselves if the complainants can more clearly articulate exactly what Spotify is supposed to have done.  States Spotify …

“Plaintiffs allege that Spotify “reproduce[s]” and “distribute[s]” Plaintiffs’ works, thereby facilely checking the boxes to plead an infringement of the reproduction and distribution rights. But Plaintiffs leave Spotify guessing as to what activity Plaintiffs actually believe entails “reproduction” or “distribution.” The only activity of Spotify’s that Plaintiffs identify as infringing is its “streaming” of sound recordings embodying Plaintiffs’ copyrighted musical compositions.”

The Gaudio and Bluewater complaints lay out a broad narrative that accuses Spotify of building a multi-billion-dollar business while knowingly exploiting thousands of songs over a period of years without obtaining mechanical licenses, hence the “don’t call us Napster” response from Spotify. The complainants further state that the $43-million settlement resulting from a class-action suit brought by David Lowery and Melissa Ferrick was little more than a slap on the wrist; that it amounts to $4 per infringement; that it provides no disincentive to continue infringing; and that the lion’s share of the money will go to the major labels anyway.

Further, with Spotify poised to go public, the complaints also cite the major labels’ agreements to exchange sound recording rights for equity in the streaming company. Gaudio/Bluewater describe these deals as an obstacle to the labels themselves holding Spotify to account for using unlicensed works. 

Counter to this narrative, however, Digital Music News reports that the music publishers represented by the National Music Publishers Association (NMPA) have “declared war on Spotify,” citing CEO David Israelite stating that Spotify’s assertions in its response mean that it is now in a fight with “all songwriters.”  What did Spotify say to trigger Israelite’s comments?  Well …

Despite the demand for a “more definite statement,” the Spotify brief is a bit cryptic itself.  It balks at some of the language in the Gaudio/Bluewater complaints, defending the company as an above-board, legal service that should not be compared to pirate sites et al. They may be protesting a bit much, though.  The “infringe now, settle later” strategy of which they’ve been accused is implicit in the Lowery/Ferrick suit and is certainly an approach consistent with most tech companies whose core business depends on the exploitation of creative works.

The only salient, triable issue at the bottom of all the rhetoric is the question ofwhether Spotify repeatedly infringed Sections 106 (1) & (3) of the copyright act by making use of songs without mechanical licenses.  To this, the Spotify brief comes extremely close to claiming that they don’t need mechanical licenses. The music site Complete Music Update published a whole article under exactly that headline, and the declaration was precisely what triggered the unequivocal response from Israelite at the NMPA.

Spotify has asserted that streaming only implicates the public performance right (§106(4)), which they state is amply covered by paying license fees to the performing rights organizations (PROs) that manage those rights.  Mechanicals are required separately—and obtained as compulsory licenses for rates set by a rate court—for anyone seeking to reproduce or distribute a song. For instance, an artist who wants to record a cover song on her new album needs a mechanical license.

While it may not be completely unreasonable to argue that streaming is a public performance rather than a distribution, that would only alleviate the infringement of §106(3).  It is not possible for Spotify to provide its service without reproducing files on its servers; and there is sufficient case law (including Napster) to affirm that this type of copying implicates the reproduction right (§106(1)). Moreover, as the CMU article observes, it is worth asking why, if Spotify believes it does not need mechanical licenses, the company settled the Lowery/Ferrick class-action suit, which was entirely based on the use of songs without mechanicals.

Additionally, Spotify’s mobile app enables downloading, at least for subscribers, and this would seem to implicate distribution.  Anticipating this response from the complainants, the Spotify brief bizarrely states that it would assert a defense of fair use.  Not only does that sound like a non-starter, but it’s a pretty odd thing to say after asserting that you never needed the mechanical license in the first place. 

As for the some of the more rhetorical aspects of the briefs, Spotify accuses Gaudio/Bluewater of “dangling” big money in front of the Ferrick class members and of painting the streaming service with the same brush as Napster and other piratical enterprises.  Meanwhile, Gaudio/Bluewater make an intriguing point that as Spotify continued to raise hundreds of millions of dollars for its growth, none of those resources were apparently directed toward improving the company’s ability to ensure the mechanical licenses were paid for all the music on the platform.

Based on Israelite’s statement, if Spotify doesn’t walk back the claim, this fight could turn existential for the streaming company. As a matter of copyright history, the transition to music streaming may be one of those threshold moments that ultimately requires Congress to recalibrate the statutes according to the intent of IP in the first place. Because if the courts were to agree with Spotify that mechanicals are simply not required for streaming, and we consumers do nearly all of our listening via streaming, this would undermine the incentive for songwriters and composers, which is foundational to the existence of copyright.

A Lot of Noise on Spotify

When Napster appeared in 1999, it was a bit of a perfect storm situation for fans to rationalize music piracy.  Granted, people would have used the file-sharing app no matter what, but the music industry had indeed become demonstrably bloated; and one chronic complaint among consumers was that we were required to buy a $15 CD just to get two good tracks with eight filler songs.  Whether this criticism was valid or not is hard for me to say, since I mostly abandoned contemporary music in the 90s. But I have certainly encountered this allegation, even during the last five years, as part of a recurring narrative that piracy “taught the industry a lesson” about what consumers want, which is how we ended up with iTunes, Pandora, and Spotify.

But as a Spotify user, you might have had the experience of dealing with a new variation on this “filler tracks” theme.  Perhaps, you’ve searched for a song, got a result, hit play without paying much attention, and then asked, What the hell am I listening to?  I had no idea there was a pan-flute version of “Holiday in Cambodia”?

Okay, maybe you won’t find anything quite that absurd, but a recent flurry of music news reporting says that not only is Spotify full to bustin’ with mediocre covers of popular songs, but the streaming company itself has been accused of commissioning volumes of filler music in an effort to drive down the licensing fees it has to pay to major and independent artists.  In particular, it is alleged that those genre playlists with names like “Focus” or “Ambient Chill” are not only filled with tracks by artists you never heard of, but possibly by artists who don’t exist other than as fronts for music that is owned by Spotify.

Music Business Worldwide reported in August 2016 that Spotify was commissioning producers to create tracks with “specific guidelines” and then crediting these works to non-existent artists.  This accusation remains an allegation, which Spotify has flatly denied, but to which MBW responded just a few days ago, essentially asking, Okay, then who are all these “artists.”  Reporting, Tim Ingham poses the following reasonable questions:

“Put it this way: if an act on Spotify has millions of streams from just a couple of tracks, but no other internet presence whatsoever, wouldn’t that strike you as odd? No Facebook, no Twitter, no ReverbNation page, no homepage, no SoundCloud? What about if they had no manager/lawyer and no industry relationships? And seemingly, according to their Spotify credits, personally owned all of their own rights? What if their music then only appeared on Spotify – and was nowhere to be seen on YouTube, Apple Music etc.? That would be weird, right? That would make no sense. In total, tracks by the 50 ‘fake’ artists we’ve [identified] amount to over 520m Spotify streams. By traditional rights-holder payout metrics, that’s worth more than $3m in royalty payouts.”

Whether or not Spotify itself has been commissioning content that is misleading customers, one concern with stuffing these playlists with covers is what happens when we get to other genres?  How soon before users click on the “Jazz” playlist to hear the sound stylings of John CoalTrain? What does that say about “music discovery” in the digital age?

Songs are covered by compulsory licenses. Anyone who pays the license fee to the songwriters/publishers may cover any of these songs without permission, and this provides opportunity for both good and not-so-good music makers to capitalize on the fact that listeners will naturally use a service like Spotify to search for titles or keywords.  As Adam K. Raymond explains in his in-depth discussion on Vulture, “Bob Seger, the bearded grandfather of mainstream radio rock, was not on Spotify until this month. But Bob Segar has been there for years, and the misspelled version of the Detroit rocker racked up 1.2 million streams on a cover of “Turn the Page” in the real Seger’s absence.”

Indeed. I found a Bob Segar Playlist with a number of Bob Seger hits covered by an artist called Sam Morrison and Turn the Page.  These are not cover songs in the tradition of a distinctive artist performing his/her own version (e.g. Whitney Houston does Dolly Parton’s “I Will Always Love You”) but are instead in the style of a “tribute” band.  Sam Morrison’s impersonation of the real Seger is just good enough that any number of listeners might not notice right away—or ever—that they’re not listening to Bob Seger. And the misspelling of artist’s name is clearly meant to deceive.

Raymond goes into considerable detail on the various ways different parties game Spotify to earn revenue with the musical equivalent of clickbait—like releasing duplicate tracks with different titles, or producing “songs about everything” so that a search for one’s hometown, for instance, might turn up a song about it. Is it a song you want to listen to?  Well, to each his own.  Raymond observes …

“The big loser here is the listener. He’s increasingly having to dodge spammers and imposters to find his favorite artists, and then slogging through endless albums once he does. But maybe this isn’t such a bad thing. Listeners have long been the primary beneficiaries of free or dirt-cheap streaming services. Now, after years of artists alone coping with the devaluation of music, fans are feeling its effects too. It may not be ideal for anyone, but at least everyone is suffering together.”

One of the promises made by the internet industry to artists and consumers was the aforementioned opportunity for discovery; but I don’t think anyone meant the discovery of dreck that fans would have sift through to find the work of artists we already know or might want to know.  Nobody appears to be doing anything illegal in gaming the system (unless Spotify is engaged in any type of fraud), but that doesn’t mean the new models don’t enable some far more complex forms of chicanery than those 90s-era complaints about overpriced CDs.

Referring back to the Canadian Supreme Court decision in the Equustek case, the significance of that decision (despite the wailing and teeth-gnashing at EFF et al) is that it recognizes the ways in which the tools we use to derive benefit from the web—search, SEO, keywords, etc.—are very easily wielded by hucksters, spammers, and outright thieves.  No, listening to a Bob Seger impersonator on Spotify isn’t going to hurt anyone, except perhaps Bob Seger, but reading fake news does, and so does buying counterfeit products or accidentally giving information to a scam service.

I doubt we’ve heard the last on the question of whether or not Spotify is actually commissioning works under pseudonymous artist names, or where that investigation might lead.  To me, these latest revelations are just part of the same narrative that keeps unfolding this year—that the “new models” of the digital age have some serious flaws for which the fixes might be that these companies have to behave a little bit like “legacy” industry.  And that may not be a bad thing.