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Now Tidal is sued over US mechanical royalties

By | Published on Tuesday 1 March 2016


Good news for Tidal, it’s finally up there with the big guys in streaming. What a glorious day this truly is. Yes, Jay-Z’s Tidal has finally secured its first multi-million dollar mechanical rights lawsuit. Roll on world domination.

Tidal is being sued by musician John Emanuele of US duo The American Dollar and Yesh Music, a music publisher allied with the outfit. They claim that the streaming service – despite bigging up its artist-friendly “we pay more” credentials after Jay-Z’s acquisition last year – has failed to pay all the royalties due on the group’s music.

The dispute centres on the band’s publishing rights, they having supplied the recordings themselves via distributor Tunecore. The lawsuit alleges that Tidal has failed to pay royalties due to Emanuele for the exploitation of his songs on the streaming platform, that it underpaid royalties due to Mesh Music, and that it failed to issue notices of intent regarding the duo’s work, as required when services plan to utilise the compulsory licence that applies to the mechanical rights in songs in the US.

There are many parallels between Emanuele’s lawsuit against Tidal and the two legal actions recently launched in the US against Spotify by musicians David Lowery and Melissa Ferrick. At the heart of the case is the way so called mechanical royalties are paid to songwriters and publishers by those who reproduce or distribute recordings of their songs in America.

Licensees can make use of a compulsory licence in this domain, so don’t need specific permission from the songwriters or publishers who control any one song, however they are obliged to file certain paperwork and pay statutory royalties to the rights owner in a timely manner. Not that anyone ever did, in that the processing of mechanical royalties under the compulsory licence has always been at best inefficient.

These inefficiencies have become ever more problematic in the streaming age, because of the number of songs that are made available by the average on-demand streaming service. Whereas with CDs and downloads, the label was usually the licensee, in the streaming domain the digital platform has to sort out all the licensing.

The big issue is the lack of decent music data of course, and in particular a database that tells a streaming service which specific songs are contained in each specific recording. Many in the music rights sector reckon that that’s really a failure of the labels and the publishers rather than the digital companies, though ultimately the legal liabilities do lie with the latter.

In addition to the allegations in common with Lowery and Ferrick’s litigation about the streaming service’s failure to comply with the terms of the compulsory licence, Emanuele’s lawsuit also makes allegations about the way Tidal calculates what royalties are due when it does know who to pay. The lawsuit claims that Tidal deliberately calculates royalties in a way that results in lower payments to rights owners.

It then deals with the fact that streaming services usually outsource all their mechanical rights licensing administration to middle-men agencies like the Harry Fox Agency. But Tidal can’t just blame HFA, says the legal filing, because “defendants know full well that Harry Fox do not even try to service notices of intent in accordance with [the law] or calculate proper mechanical royalty rates unless expressly directed”.

Tidal is having none of this, with the streaming service issuing a blunt response to the legal action, seemingly annoyed that the litigation came out of the blue, and that it targets Jay-Z’s own company in addition to Tidal direct.

The company said: “Tidal is up to date on all royalties for the rights to the music stated in Yesh Music, LLC and John Emanuele’s claim and they are misinformed as to who, if anyone, owes royalty payments to them. As Yesh Music, LLC admits in their claim, Tidal has the rights to the master recordings through its distributor Tunecore and have paid Tunecore in full for such exploitations. Their dispute appears to be over the mechanical licenses, which we are also up to date on payments via Harry Fox Agency our administrator of mechanical royalties”.

The company goes on: “This is the first we have heard of this dispute and Yesh Music, LLC should be engaging Harry Fox Agency if they believe they are owed the royalties claimed. They especially should not be naming S Carter Enterprises, LLC, which has nothing to do with Tidal. This claim serves as nothing other than a perfect example of why America needs tort reform”.

The litigation actually relates to alleged infringements that occurred both before and after Jay-Z’s acquisition of Tidal, and like Lowery and Ferrick’s legal action, it is seeking class action status, so that other songwriters could benefit from success in court.

Also in common with the Spotify lawsuits, the plaintiffs are seeking statutory damages for copyright infringement, which would vastly exceed any unpaid mechanical royalties that are actually due to the songwriter or publisher at the statutory rate, not least because, as Tidal was keen to stress last night, “the entire catalogue in question streamed fewer than 13,000 times on Tidal and its predecessor over the past year”.

Although introducing some extra gripes, this new lawsuit very much sits in the box with Lowery and Ferrick’s actions against Spotify, and therefore is part of the wider debate – beyond the technicalities of the compulsory licence – as to whether this really is a significant failing on the part of the streaming services for which they should be held liable.

Or whether the music community at large – artists, songwriters, labels, publishers and streaming services – would actually be better engaged in trying to solve America’s mechanical rights issues in the short term and the music industry’s wider data problems in the longer term.

Though, with Tidal’s “we’re the artist friendly service” boasts and Jay-Z’s involvement in the business, this dispute is likely to get even more coverage than Lowery and Ferrick’s Spotify litigation. And it’s always nice to be talked about, isn’t it?