By Ashley Berger
For over a decade, streaming music has been a typical way for consumers to access an artist’s work. This method of delivery is scandalous, from the era of Napster and Limewire, to the more recent fad of YouTube conversion software, these systems have been a means by which the consumer can access the music without paying for it. These types of programs have always been labeled illegal, a new contender in this ring has shown up: Spotify.
Since its launch in 2008, Spotify has been a service that allows consumers to stream and listen to music. The service can be downloaded on either a Mac or a PC, an Android or an iPhone, thus providing the listener with a variety of possible ways to obtain the content. A unique feature about Spotify that differs it from other streaming services is the users ability to create playlists and listen to songs on demand, thereby constituting an “interactive” music service. Other streaming services, such as Pandora and iHeartRadio function as a true radio station, where a user can select a station but cannot select a specific track to listen to, making them “non-interactive” services. Apple Music requires the user to purchase each track or purchase a subscription, in which Apple owns the actual file and allows you to stream the track. The rights to the song are never transferred to the listener. With over 140 million users worldwide, Spotify is the largest music streaming service available today.
While Spotify’s option in this market is clearly attractive to the user, who can pay a rate as low as $4.99 per month, artists who allow Spotify to host their catalogs are not necessarily pleased with the arrangement.
Spotify has been sued a plethora of times on grounds of copyright infringement and failure to pay mechanical and performance royalties. Most recently, Spotify was sued in two separate lawsuits by songwriters whose works were streamed without a license and that songwriters were failing to be paid mechanical royalties for their works streamed on Spotify. The two suits were eventually consolidated and after a little more than a year in federal court, the parties eventually settled for an unprecedented $43.45 million to be distributed among the alleged injured artists. The settlement is awaiting approval from the court.
While this settlement seems like a workable option for both parties, when that figure is divided amongst those claiming to be injured, the amount paid to each artist is only at most $3.82 per infringed composition. Spotify is slated to make its first public offering, and the settlement would significantly help that process come to fruition. However, artists are urging the settlement not to be approved, on the grounds that each individual artist could stand to gain far more in other suits filed individually suing for each individual royalty that has not been paid. To compare, damages for a copyright infringement based on a singular piece of work could range up to $150,000. Some of the music titans who have expressed opposition to the settlement terms include: Tom Morello, Dan Auerbach and Rivers Cuomo. The late Tom Petty was also against the terms of the settlement, until his recent passing in October of 2017.
Though the settlement was negotiated and finalized in May of 2017, the terms are still awaiting approval. Though the proposed settlement encompasses all injured artists, artists can opt out of the deal and then file their own separate suits.
This approach has already been taken by some aggrieved artists who filed lawsuits alleging the distribution through Spotify without being fully licensed. Bob Guadio and Bluewater Music Services Corporation have filed actions demanding the statutory $150,000 per each infringed work; allegations that encompass thousands of songs. In theory, the amount of damages from these two lawsuits alone could total millions.
What does this mean for Spotify’s plans to go public? According to figures published at the end of September 2017, Spotify stands to be valued between $13 and $20 billion for it’s initial public offering (IPO). Compared to those figures, the amounts in litigation seem like small amounts to pay in order for the IPO to be successful. In 2016, the company’s losses totaled around $600 million, the total revenues from the streaming giant doubled from the previous year to bring in $3.4 billion in revenue. Only a month after the Guadio and Bluewater lawsuits, Spotify renewed its licensing deal with Warner, the last crucial step that the company needed to finalize before preparing for the IPO.
Only time will tell what happens next for both the recording titans who allege their works are being infringed and the streaming behemoth now distributing the music. However, it seems that Spotify shows no signs of slowing down in terms of its growth and its unprecedented IPO and that though the artists are the only reason Spotify has a business, they may be paying the biggest price for allowing their music to remain on Spotify.
Student Bio: Ashley Berger is a third year law student at Suffolk University Law School and serves as the Development Editor on the Journal of High Technology Law. Ashley holds a Bachelor of Arts in both History and Legal Studies from the University of Massachusetts Amherst.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.