Future of Music Coalition

A few months ago, we published an article about mechanical royalties not being properly paid out to publishers and songwriters. At that point, there was not yet a sense of how this issue would be resolved, beyond vague reports that Spotify and the National Music Publishers Association (NMPA) were collaborating on a musical works database and a method for distributing unpaid royalties, estimated by some to be 10-15 percent of songs on the service.

Since then there have been several lawsuits—first with a case against Spotify from David Lowery of the bands Cracker and Camper Van Beethoven, followed by Flo & Eddie of vintage pop act The Turtles, who earlier sued digital radio services for not paying royalties on pre-’72 sound recordings. Then came a suit against Spotify by singer-songwriter Melissa Ferrick. And just this week saw an infringement claim from Yesh Music LLC and John Emanuele, who allege nonpayment from several music services, including Tidal, Beats Music (now Apple Music), Google Play, Slacker, Deezer, Microsoft and Rdio (the latter’s assets now owned by Pandora, pending successful Rdio bankruptcy).

What the heck is going on here?

To answer that question, we’ll need to back up a bit. First, you should probably check out our original post. If you don’t have time for that, here are a few basic points to understand:

1. There are two copyrights in a piece of music: the sound recording (imagine performances captured on tape or hard drive) and the musical work (imagine notes on paper and lyrics). A music service like Spotify must license both “sides” of the musical copyright in order to run their business.

2. Under U.S. law, anyone can obtain a license to make a reproduction or distribution of an underlying composition without having to directly negotiate permission with the copyright owner(s), provided they follow the guidelines laid out in Section 115 of the Copyright Act. To be eligible for a compulsory license, a user has to send a Notice of Intent (NOI) to at least one of the publishers of a musical work no later than 30 days before making the reproduction/distribution (for streaming, the understanding is that the reproduction and distribution happens at the time of transmission). The compulsory license—which you may hear people refer to as just “the compulsory”—also lays out specifics for reporting and royalty distribution. The user has to send monthly accounting statements and pay on a 30-day schedule. If a user cannot locate one of the publishers to serve, they can file notice with the US Copyright Office, which, for a small fee, will publish the until a publisher comes forward. Failure of a licensee to comply with any of these provisions renders them ineligible for the license and potentially liable for infringement.

It has come to light that not all of the mechanical royalties owed for songs played on digital music services like Spotify have been paid out to rights holders, a fact uncontested by several of the services. In Spotify’s case, the amount owed is allegedly anywhere from 16 to 25 million dollars. Lowery had been pointing to discrepancies in licensing and royalty distribution well before it came to the attention of NMPA, the trade industry group that representing music publishers. Rather than waiting around for the matter to be settled by the large corporate players, on December 28, 2015, Lowery filed a lawsuit against Spotify seeking class status so that other songwriters could be awarded damages should the case for infringement prevail.  Since then, we’ve seen a flurry of litigation, though it remains to be seen where these cases end up.