Spotify was recently hit with a lawsuit for $345 million plus after its failure to fork over cash on mechanical licenses for the Bluewater Music Services Corp. This is, however, by no means the first time Spotify has been hit with such a suit.
When you stream music on Spotify, are you aware that as you are enjoying your favorite song, Spotify might not be paying the person who wrote that song?
Spotify has been sued for upwards of $345 million by Bob Gaudio and Bluewater Music Services Corporation for failure to pay mechanical licenses when their compositions are streamed on Spotify. Gaudio, a former member of Frankie Valli and The Four Seasons, wrote and publishes some of the group’s biggest hits including “Sherry,” “Big Girls Don’t Cry,” and “Walk Like a Man,” as well as Valli’s solo hit “Can’t Take My Eyes Off of You.” Bluewater administers the publishing for compositions like Player's “Baby Come Back,” Miranda Lambert’s “White Liar,” and Guns ‘N Roses’ “Yesterdays.”
Streaming requires several licenses –sound recording licenses from the record labels; performance licenses for the compositions from performance rights organizations such as ASCAP and BMI; and mechanical licenses for the reproduction of the compositions. While Spotify has deals with the major labels, and blanket licenses with ASCAP and BMI, Spotify has not complied with the requirements for mechanical licenses and payments for all compositions streamed on its platform. Obtaining a mechanical license in the United States is compulsory, meaning that a person or company wishing to reproduce a composition must follow the guidelines in Section 115 of the United States Copyright Act to serve a “Notice of Intent” on the copyright owner and pay said owner the compulsory license fee. Spotify has followed this procedure for compositions affiliated with the Harry Fox Agency (the closest body the United States has to a mechanical rights society), but there are many compositions not affiliated with the Harry Fox Agency that Spotify would need to contact and pay directly – and Spotify largely has not done so.
This is not the first time Spotify has come under fire for its inadequate licensing practices. In 2016, Spotify reached a $30 million dollar settlement with the National Music Publisher’s Association (NMPA) for unpaid mechanical royalties, and Spotify just settled another class action suit for $43.4 million dollars. While maximum statutory damages rates are $150,000 per infringed composition, Bluewater claims that Spotify will only have to pay songwriters $4 per infringed composition after litigation fees are paid. Per the previous settlements, Spotify must also implement a better system to properly track and pay mechanical royalties, and Bluewater asserts this has not yet happened.
The attorney for both Gaudio and Bluewater is Richard S. Busch, most recently in the news for his representation of Marvin Gaye’s estate in the “Blurred Lines” case. Echoing my previous sentiments, a press release citing Busch’s complaint sums up the issue in a single sentence: “Songwriters and publishers should not have to work this hard to get paid or have their life’s work properly licensed, and companies should not be allowed to build businesses—much less billion-dollar businesses—on the concept of ‘infringe now and ask questions later.’”
*This article does not constitute legal advice.
Erin M. Jacobson is a music attorney whose clients include Grammy and Emmy Award winners, legacy clients and catalogs, songwriters, music publishers, record labels, and independent artists and companies. She is based in Los Angeles where she handles a wide variety of music agreements and negotiations, in addition to owning and overseeing all operations for Indie Artist Resource, the independent musician’s resource for legal and business protection. Ms. Jacobson also serves on the boards of the California Copyright Conference (CCC) and Association of Independent Music Publishers (AIMP).