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Tensions reportedly increase between Spotify and the US music publishers

By | Published on Tuesday 18 July 2017

Spotify

While America’s National Music Publishers Association initially played peace keeper when a group of independent songwriters started shouting loudly about Spotify not paying all the mechanical royalties that were due on its streams Stateside, according to the New York Post there are now increasing tensions between the trade group and the streaming firm.

As much previously reported, it is generally agreed that a stream exploits both the reproduction and the communication elements of the copyright. Which is important when it comes to streaming services licensing the rights to exploit the songs controlled by songwriters and music publishers, because in some countries the reproduction bit of the song copyright – aka the ‘mechanical rights’ – and the communication bit – aka the ‘performing rights’ – are licensed separately by different organisations.

But in most countries both mechanical and performing rights can be licensed via the collective licensing system – and even where some publishers license their rights directly, the collecting societies help administrate the collection of any royalties due, telling the streaming services what monies are owing and passing the money onto the relevant writers and publishers. The exception is the US, where collecting societies like BMI and ASCAP only represent the performing rights in songs.

There is a compulsory licence covering mechanical rights Stateside, so in theory a streaming service doesn’t need to ask for permission to exploit that side of the song copyright, but it does need to alert all and any relevant copyright owners that their songs are going to be utilised, and then pay those rights owners at a royalty rate set by statute.

Spotify hired a company called The Harry Fox Agency – previously owned by the NMPA – to handle that process, but HFA, while the closest the US has to a mechanical rights society, doesn’t have every songwriter or music publisher on its system.

Which meant a bunch of independent songwriters and music publishers went unpaid, resulting in class action litigation led by musicians David Lowery and Melissa Ferrick. As that legal battle was getting underway in early 2016, the NMPA announced it had agreed a settlement deal with Spotify over previously unpaid mechanicals, and it encouraged writers and publishers to sign up to its deal rather than joining Lowery or Ferrick’s class actions. Those class actions were then subsequently settled back in May this year.

Which means the NMPA and Spotify were friends in the face of the Lowery and Ferrick litigation. But, according to The Post, that friendship has now soured.

Sources tell the paper that the NMPA has been pushing for new commitments from the streaming firm, partly based on the expectation that Spotify will list on the New York Stock Exchange at some point in the next year. It’s seemingly been pointed out that while the major music groups and, via Merlin, many of the indie labels have equity in the Spotify company, that is not the case for the independent publishers.

The trade group has also apparently been disputing Spotify’s long-held – and not entirely without substance – excuse for not paying all the mechanical royalties due on the songs it streams in the US: ie the lack of a central database telling it which songs are contained within which recordings, and who controls the rights in those songs.

But, the Post says, the NMPA has stated in a recent letter that it knows of examples where mechanical royalties went unpaid on songs where the ownership information for said works was clearly listed at the US Copyright Office. Though that doesn’t really deal with the issue of knowing which song is contained within which recording, given track title alone doesn’t confirm that with 100% certainty.

The Post then says that Spotify has been pushing back on the NMPA’s recent requests and criticisms. It writes that: “Spotify’s General Counsel, Horacio Gutierrez, ripped into the publisher group in a June 14 letter, accusing the NMPA of trying to grab more than what the [2016] settlement called for”.

There was chatter in May to the effect that some of the indie publishers who signed up to the NMPA settlement last year were annoyed that the subsequent settlement of the Lowery/Ferrick class actions arguably offered those writers and publishers who joined the litigation party a better deal. Which may or may not have added to the increased tensions in the NMPA’s relationship with Spotify.

To date the back and forth between the trade group and the streaming firm has been limited to stern letters, though the Post’s sources are talking about possible legal action from the publishers’ side of the table. Which would be fun just as Spotify is prepping to go public on Wall Street. Fun fun fun.



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