Business News Digital Legal

David Lowery sues Spotify over unpaid mechanicals

By | Published on Tuesday 29 December 2015

David Lowery

Musician David Lowery has filed a class action lawsuit against Spotify in relation to the mechanical rights mess that exists in the streaming music space Stateside.

Lowery – frontman with Camper Van Beethoven and Cracker and, in recent years, a very vocal critic of digital music companies and the royalties they pay – has hired the services of law firm Michelman & Robinson LLP to pursue the litigation. As a class action, other songwriters could chase damages if the lawsuit is successful.

As previously reported, all sides agree that the payment of so called mechanical royalties by US on-demand streaming services is a mess, though there has previously been a difference of opinion as to whose job it is to clean things up and make sure songwriters and publishers are paid in a timely fashion.

The payment of publishing royalties by streaming services is a complex affair at the best of times. While a streaming platform assumes that whichever label or distributor provides it with any one recording needs to be paid if and when that track is played, the digital firm doesn’t know who controls the copyright in the accompanying song. And if it’s a co-write, the song could be controlled by an assortment of songwriters, publishers and collecting societies.

Add to that the fact that a stream exploits both the ‘mechanical’ and the ’performing’ rights of the song copyright, and the music publishing sector has traditionally handled the two elements of the copyright separately. So in the UK, PRS would always handle the performing right, while either the publisher or collecting society MCPS would handle the mechanical rights, depending on the repertoire and scenario.

In Europe, Spotify has direct relationships with the five biggest music publishers and then with each of the European collecting societies. It provides all its song licensors with monthly reports of all songs streamed, and they must work out which songs they own, invoice, and then split monies between the performing and mechanical rights, before ultimately reporting back to and paying any beneficiary songwriters.

Though in Europe, generally the publisher and/or collecting society will invoice for both mechanical and performing royalties in one go, and then split the income at their end. In the US, however, where Spotify primarily deals with the collecting societies BMI and ASCAP, those societies only handle performing rights, leaving mechanicals somewhat in limbo.

The mechanical rights in songs are covered by a compulsory licence in America, so streaming services are automatically allowed to exploit that side of the copyright, but they must comply with the rules of that licence, which basically means letting a rights owner know their songs are being used, and then paying a set royalty.

The digital services point out that the way song licensing works is needlessly complex and hindered all the more because there is no central database of song rights ownership. Some in the music publishing sector agree that the lack of decent data is the primary problem and that’s sort of the industry’s own fault. But others point out that the compulsory licence comes with obligations, and digital services need to comply with them, even if doing so is annoying and expensive.

This whole issue was at the heart of the Spotify v Victory Records spat earlier this year, of course. At the time, Lowery wrote to the New York Attorney General urging him to investigate the alleged failure of streaming services to pay royalties to songwriters, noting that the New York AG’s office had investigated similar failings by record companies to pay royalties to artists back in 2004.

Although Spotify subsequently settled with Victory, the streaming service’s Global Head Of Publisher Relations, James Duffett-Smith, conceded just before Christmas that more needed to be done to more efficiently pay publishers and songwriters their royalties, adding that the streaming firm would be investing in new “resources and technical expertise to build a comprehensive publishing administration system” in 2016.

To Spotify’s critics, that was basically an admission of guilt that the company had failed to pay royalties due to songwriters. Though the streaming firm would deny that, and point out that it has always been willing to pay songwriters their due, if only it can work out who to pay.

Lowery’s lawsuit, which is seeking at least $150 million in damages – six times higher than the $25 million Spotify is rumoured to have set aside to cover previously unpaid mechanicals – was filed yesterday at the Central District Court of California.

According to Billboard, the complaint claims that Spotify unlawfully “distributed copyrighted music compositions to more than 75 million users, but failed to identify or locate the owners of those compositions for payment, and did not issue a notice of intent to employ a compulsory license”.

Spotify is yet to respond.