Tidal Sued For Unpaid Royalties And Cooking The Streaming Counts

from the welcome-to-the-club dept

It's been no secret that Tidal, Jay-Z's foray into the music streaming business, hasn't exactly had the success it was supposed to have. In the wake of all the angry sentiment about just how much other streaming services were paying musical artists, Tidal positioned itself as artist-friendly, the option for fans that want to make sure musicians get paid. It sounded great, except now Tidal finds itself joining the club of streaming services facing legal action over artist royalties.

Over the weekend, Yesh Music Publishing and John Emanuele (of the duo American Dollar) filed a lawsuit against Tidal for $5 million. The lawsuit claims that Tidal licensed at least 118 songs by American Dollar without the group’s permission and hasn’t paid the royalties it owes for streaming the songs. The complaint also says Tidal is “deliberately miscalculating” its per-stream royalty rates and failing to send reports to the American Dollar about streams of their songs.
If this all sounds incredibly familiar, it should, because these are the same accusations leveled against the other streaming services. This particular action is similar to David Lowery's suit against Spotify, in that it appears to revolve around mechanical licenses for compositions used in streaming music. While Tidal will likely argue that it properly licensed the works via its agreement with the Harry Fox Agency and via Section 115, it's not exactly settled that streaming services are covered by Section 115. Under Section 115, Tidal would serve a "notice of intention", or NOI, in order to get the license if it is unsure of whom it should be paying royalties to for a given composition. Tidal, like many streaming services, works with a third party to manage their licensing and NOIs for them (more on that in a moment). Indeed, the suit directly claims that no NOIs were filed, but sadly doesn't include the Exhibits in that PDF so that the reader could determine exactly which compositions are in question in this case.
Defendants failed to serve NOIs or timely NOIs for Plaintiffs’ and the Putative Class’ Copyrighted Compositions. Defendants’ failure to serve NOIs before the start of distribution precludes the creation of a compulsory license, and it does so both as to copies distributed prior to service and as to copies distributed thereafter. The tremendous power granted to Defendant under Section 115 is balanced by the strict obligations regarding notice. Defendant intentionally failed to adhere to its Section 115 obligations, while enjoying all of the benefits afforded by Section 115.
The filing goes on to acknowledge that Tidal has a third-party administrator managing the royalty payments and serving NOIs for them. That third-party is the Harry Fox Agency, the same company that was involved in Lowery's Spotify suit, along with a company called Music Reports. The suit claims that Tidal's ownership is named on the suit because those ownership entities "know full well that Harry Fox and Music Reports do not even try to serve NOIs...or calculate proper mechanical royalty rates unless expressly directed."

On top of this, the suit claims that Tidal is being shifty with how royalties are both calculated and reported.
Defendants’ systematic underpayment of royalties was done in several ways. First Defendants deliberately miscalculating the per-stream royalty rates by including millions of streams Defendants do not pay royalties in the calculation. This diluted the paid per-stream rate for royalty payments by up to 35%. Next Defendants systematically undercut the calculation of mechanical royalties to Plaintiff and the Putative Class by illegal deals with equity investor partners 65. Finally, Defendants failed to serve monthly detailed reports as required by the statute.
Tidal, as expected, is pointing back to the third-parties as being responsible.
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 entire catalogue in question streamed fewer than 13,000 times on TIDAL and its predecessor over the past year. We have now removed all music associated with Yesh Music, LLC and John Emanuele from the service. 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.
Except, again, nobody seems to agree on whether or not Section 115, the basis for the compulsory license, applies to streaming sites like Tidal.

But the larger lesson in all of this is just how certain a thing it is that any new service that is in any way disrupting will be targeted and vilified. Keep in mind that Tidal was supposed to be the artist-friendly streaming service for music -- the one that artists would be excited to work with, rather than those other guys. And here we are, not terribly far from the birth of the service, finding the same attacks from artists on it as were levied against the incumbent streaming services. Either the artist-owned Tidal tried to be artist-friendly but couldn't because of the insane nature of music licensing, or the artist-owned Tidal found being so-called "artist-friendly" to be impossible in the modern era of music services. Either way, the cure for this isn't more vilification of streaming services, it's getting copyright and licensing on sane, stable ground.

Filed Under: american dollar, compositions, compulsory licenses, copyright, john emanuele, mechanical licenses, noi, section 115, streaming
Companies: harry fox agency, tidal, yesh music publishing


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  • identicon
    Anonymous Coward, 1 Mar 2016 @ 4:49pm

    So, even artists can't seem to pay each other.

    And yet they're still going to blame legal consumers for pirating (or not pirating, you don't actually need to pirate to get accused) a Kanye West album they paid for and weren't allowed to legally download.

    reply to this | link to this | view in chronology ]

  • icon
    kenichi tanaka (profile), 1 Mar 2016 @ 5:19pm

    This is what I come to expect from Techdirt, recently. Biased articles that shed no light on the issue. Tidal is trying to blame the Harry Fox Agency for failing to pay Yesh Music the royalties they are owed. Even if HFA handled the licensing of such music to Tidal, it's Tidal's responsibility to ensure that the royalty checks are being paid out and it's their liability if the artists aren't being paid.

    It seems that Tidal and HFA are pulling the old finger pointing scam:

    image: http://s9.postimg.org/5xusa9ebz/Finger_pointing.jpg

    What it comes down to is that Tidal is ultimately responsible and liable for the artist getting paid and all of the finger pointing in the world can;t change that very fact.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 1 Mar 2016 @ 5:57pm

      Re:

      That's pretty much what the Techdirt article says. There's some other stuff in there about it not being really decided if they can even DO a compulsory license, but I hardly think that's biased.

      I supposed you could say it's biased that they are pointing out the irony of this by artists, for artists service being sued by those artists it was supposed to help, but I really think it's a fair cop.

      reply to this | link to this | view in chronology ]

    • icon
      Mike Masnick (profile), 1 Mar 2016 @ 6:17pm

      Re:

      What it comes down to is that Tidal is ultimately responsible and liable for the artist getting paid and all of the finger pointing in the world can;t change that very fact.

      That very much depends on the contract language between Tidal and HFA. If HFA indemnifies Tidal and insists that it has legally licensed Tidal the mechanical licenses it needs, it may not be Tidal's issue at all.

      But, really, what was "biased" about the article other than detailing the facts and giving our opinion on it?

      reply to this | link to this | view in chronology ]

      • icon
        Dark Helmet (profile), 1 Mar 2016 @ 7:50pm

        Re: Re:

        "But, really, what was "biased" about the article other than detailing the facts and giving our opinion on it?"

        I'm confused on this as well, since I don't recall and never would have intended to come down as protecting Tidal, of all god awful things....

        reply to this | link to this | view in chronology ]

        • This comment has been flagged by the community. Click here to show it
          identicon
          Anonymous Coward, 1 Mar 2016 @ 9:26pm

          Re: Re: Re:

          "never would have intended to come down as protecting Tidal, of all god awful things."

          Yes of course, as protecting an artist-run entity would certainly get you the scarlet letter here on Techdirt...

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 1 Mar 2016 @ 11:23pm

            Re: Re: Re: Re:

            An artist-run entity, supposedly made to be artist-friendly where other streaming platforms have failed to serve artists, which fails to serve artists.

            Do you consider that sort of failure to be worth protecting?

            reply to this | link to this | view in chronology ]

          • icon
            PaulT (profile), 2 Mar 2016 @ 12:38am

            Re: Re: Re: Re:

            Artist run entity? No. Badly conceived, badly run entity set up as a sour grapes attempt to pretend that other services are ripping them off? Yes.

            If only the average AC was interested in addressing the actual opinions stated here as they are zealous in setting up threadbare strawmen to attack...

            reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 2 Mar 2016 @ 12:46am

            Re: Re: Re: Re:

            Or telling the truth as a music industry shill for that matter.

            reply to this | link to this | view in chronology ]

        • icon
          Ninja (profile), 2 Mar 2016 @ 4:24am

          Re: Re: Re:

          Well, after Mike agreed with some MAFIAA enthusiasts a while back I started believing in unicorns so it's no surprise. Also I'm stockpiling for the impeding apocalypse.

          reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 2 Mar 2016 @ 12:08am

      Re:

      "This is what I come to expect from Techdirt, recently. Biased articles that shed no light on the issue."

      So, this is where people who are opposed to Techdirt's articles have the opportunity to explain exactly how the article is wrong, along with citations of better sources. One of the great things about this board is that despite claims to the contrary, I've never seen a post censored or removed, and the authors even occasionally update the original article admitting they were wrong, if a substantive refutation is given. If you believe something is factually wrong, you have an open stage upon which to post your rebuttal.

      Yet, people like you constantly refuse to back up your own claims while you attack the site for now being unbiased/transparent enough. You only make your own unsupported claims and expect everyone to believe those at face value. Your post refuted nothing in the article other than to state that you disagree with who might be responsible.

      So, yet another dissenting commenter with zero substance. Why is that, I wonder? Sadly, that's what we come to expect from the anti-Techdirt crowd around here... biased comments that shed no light on the issue...

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 1 Mar 2016 @ 8:12pm

    Moral of the story ...

    ...whatever the service pays, irrespective of what yhe service is, isn't enough. Lather, rinse, repeat.

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 2 Mar 2016 @ 1:07am

      Pining for the golden days...

      Pretty much. If one out of ten musicians made $100 from the old system while the rest made squat, then even though five out of ten are making money now, spreading the money around more, that one will insist that they still deserve $100.

      If it's not paying them just as much if not more than they were making before then it doesn't matter that more people in general are making money, they still treat is as though they're being 'cheated'.

      CD sales made them X, so digital sales need to give them X as well despite the fact that people no longer need to buy an entire album to get the handful of songs they actually want.

      Digital sales made them X, so digital streaming needs to give them X as well, despite the fact that one is a one time purchase, while the other is a single listen.

      And so on.

      reply to this | link to this | view in chronology ]

      • icon
        PaulT (profile), 2 Mar 2016 @ 1:16am

        Re: Pining for the golden days...

        "If it's not paying them just as much if not more than they were making before then it doesn't matter"

        I'd add to that - many of the artists now complaining are too new to the system to have experienced those higher royalty payments. They have no direct knowledge of the way things used to work, only what they know about the public face of the people who inspired them. They just know what their management/label promised them. They then blame the streaming services rather than the people who made unsupportable promises in the wake of a changing industry. The industry's history is, of course, littered with the metaphorical corpses of artists who were promised the world, then destroyed when they discovered what their actual contract says.

        The fact that many of them complaining can't tell the difference between a purchase and radio airplay is just the way you can work out who actually understands the problems, and who's whining about something they don't understand.

        reply to this | link to this | view in chronology ]

  • icon
    kenichi tanaka (profile), 2 Mar 2016 @ 4:30am

    While it may be true that Tidal and HFA may have had agreements, that's besides the point ... Yesh Music Publishing and John Emanuele have not been paid.

    It may be hard to fathom for many but even if there was an agreement between Tidal and HFA, Yesh Music Publishing and John Emanuele have not been paid and the only thing I'm saying is that Tidal is liable for paying the artists, despite whatever agreement they may have had with HFA.

    Follow the thinking here, your neighbor borrows money from you. Some time later, he's in a hospital far away and he gives the money to a friend to pay you back but he doesn't drop the money off to you. Even though your friend and the person he gave the money to so you get paid back, your friend is still liable for paying back that loan to you, no matter what agreement your friend and the person he gave the money to.

    Tidal (A) and HFA (B) have an agreement based on various licensing agreements for music from an artist Yesh Music Publishing and John Emanuele (C). Even though Tidal (A) and HFA (B) have an agreement, even if HFA doesn't pay those royalties to Yesh Music Publishing, Tidal is still responsible for paying royalties to Yesh Music Publishing. If there's disagreement between Tidal and HFA, then that's a matter that Tidal needs to settle in court by filing suit against HFA.

    Tidal is trying to make the argument that they sent the royalties to HFA and that they are not responsible for the royalties. Fact is, Tidal is still responsible for paying royalties to Yesh Music. If HFA didn't pay Yesh Music the royalties, then Tidal needs to file suit against HFA.

    Then, there's the other part of the complaint, that they improperly calculated the per-stream royalty rates. Tidal is in a losing position and it would be in their benefit to pay Yesh Music and then turn around and take HFA to court to recoup the royalty checks they sent HFA.

    reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 2 Mar 2016 @ 6:59am

      Re:

      Tidal is liable for paying the artists, despite whatever agreement they may have had with HFA.

      Do you know what indemnity is?

      https://en.wikipedia.org/wiki/Indemnity

      Have you seen the contract between HFA and Tidal? Does it include an indemnification clause? If it does not, then you're right. If it does, you're wrong. It's that simple. If you are not aware of what the contract contains, then you're just making stuff up.

      reply to this | link to this | view in chronology ]

      • icon
        PaulT (profile), 2 Mar 2016 @ 7:20am

        Re: Re:

        I was going to say, the same logic extends to the latter part of his comment as well:

        "they improperly calculated the per-stream royalty rates. Tidal is in a losing position and it would be in their benefit to pay Yesh Music and then turn around and take HFA to court to recoup the royalty checks they sent HFA."

        Fine if the claim about the calculation is correct, and it was deliberately miscalculated - and their agreement with HFA means they're liable for any incorrect payments. If not, all he's doing is insist that Tidal submit to an extortion attempt, then turn round and try to extort the money back from HFA.

        This is bad enough if Tidal was indeed trying to screw the artists on royalty rates (due process means even the guilty should get their day in court). But, if Tidal are honestly doing what they claim with regard to their service paying artists, then this whole thing really is a sad indictment of the system (if people who have become millionaires working within the system can't get it right, what hope do independents have?).

        Nothing I'm reading is really refuting the premise of this or other articles, it just seems that some people aren't happy when an opinion blog reaches a different opinion. I'm always happy to be proven wrong, though.

        reply to this | link to this | view in chronology ]

        • icon
          nasch (profile), 2 Mar 2016 @ 7:37am

          Re: Re: Re:

          Nothing I'm reading is really refuting the premise of this or other articles, it just seems that some people aren't happy when an opinion blog reaches a different opinion.

          That is generally what you get from kenichi tenaka.

          reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 2 Mar 2016 @ 7:42am

        Re: Re:

        Yes and no. As the wronged party, I still sue the indemnified party because they are the one who wronged me. The indemnity clause has nothing to do with me. Recouping the loss because of my suit is done by them taking action against the indemnifying party.

        reply to this | link to this | view in chronology ]

  • icon
    kenichi tanaka (profile), 2 Mar 2016 @ 8:04am

    AC (Comment #19), exactly my point.

    For instance, just say that I have produced an album and Tidal wanted to license my music for their streaming service. Even if they have HFA (as a managing agent) for licensing my music for them, it's not HFA that is liable for paying royalties to either me or my production company, Tidal is wholly responsible for ensuring that royalty checks are paid.

    If Tidal sent royalty checks to HFA, then why didn't they follow through with HFA as to why Yesh Music wasn't paid royalties on the music that Tidal licensed?

    Many here are forgetting one very important fact, that Tidal didn't follow through with HFA the minute they received the lawsuit. Tidal has serious liability here and the question that hasn't been answered is "why Yesh Music wasn't paid" and "why the royalty rates were miscalculated".

    First, if it's discovered that Tidal miscalculated royalty rates on the streamed music, then they have liability with respect to the licensed music. Second, Tidal didn't paid Yesh Music royalty checks for the music they produced. HFA didn't pay royalty checks to Yesh Music for the music they produced. Thing is, HFA has no liability in regards to Yesh Music. Tidal has full liability. If Tidal's agreement with HFA resulted in royalty checks not being paid out to Yesh Music, they it's Tidal that has liability to Yesh Music and that HFA needs to answer to Tidal as to what happened to those royalty checks.

    Tidal is simply in a losing position. What it boils down to is that Yesh Music wasn't paid and that who has liability. HFA has liability to Tidal and Tidal has liability to Yesh Music.

    reply to this | link to this | view in chronology ]


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