The Music Licensing Swamp: Spotify Settles Over Failure To Obtain Mechanical Licenses

from the how-could-they-not-have-done-this? dept

A year and a half ago we wrote about a lawsuit, filed by musician/songwriter/Techdirt-hater (with a few perhaps surprising exceptions) David Lowery against Spotify, for failing to pay mechanical licenses. As we noted at the time, the more interesting thing to us beyond the lawsuit itself was how it demonstrated what an amazing clusterfuck music licensing is. That's because copyright law has not done a very good job keeping up with the times as technology changes (understatement alert).

Basically, each time a new technology undermines the way licensing worked in the past, Congress ends up duct-taping on some new kind of licensing regime. There are a bunch currently, nearly all of which can be traced back to different technological innovations from the past century and a half. And, then, the internet came along. And it wasn't entirely clear how the licensing regimes of things like radio, television, player pianos, and satellite radio fit into the internet. And, some seem to think the answer is: they ALL apply. At the very least, I don't envy the "licensing" team at the various music tech companies.

In our initial post, we noted that the issue seemed so complex that after talking to half-a-dozen copyright lawyers, no two could agree on what was actually happening with the lawsuit, or even if it was a legitimate case. The underlying issue had to do with mechanical licensing (a type of licensing which, as it's name suggests, goes all the way back to the early days of "mechanical" reproduction of compositions), and we were wondering how it could possibly be that a company as big as Spotify, whose entire story rested on the idea that it had properly negotiated licenses, had somehow failed to properly secure mechanical licenses. And, yet, a few months later, we noted that the Harry Fox Agency, an organization that many companies, including Spotify, Apple and others, use to handle these kinds of licenses, appeared to be scrambling to send out notices of intent (NOIs), which was something that should have happened way earlier.

After Lowery's lawsuit got combined with another similar lawsuit, it's now been announced that Spotify has settled the combined lawsuit and created a $43.4 million fund to pay for the mechanical licenses it failed to obtain properly in the first place. Now, there are still some who argue that mechanical licenses shouldn't even be necessary for a streaming service, but it doesn't appear that anyone has the desire to fight that one out in court, and it's understandable why. Doing so would almost certainly lead to any service making that argument getting slammed by musicians for trying to avoid paying songwriters.

Either way, Spotify has paid its way out of this and I remain baffled by the fact that it hadn't just done the right thing in the first place -- though I'm still curious if the real culprit here is the Harry Fox Agency, and if Spotify and HFA have had a long conversation or two about how this all came down. The real lesson in all of this, though, is that music licensing continues to be a complete murky, swampy mess, almost designed to make it that much harder for licensed music services to exist. While Congress dithers with silly ideas about "moving" the Copyright Office, if it wasn't to actually reform copyright laws, it should start by fixing and modernizing the crazy and overly complex licensing regimes.


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  • identicon
    stine, 5 Jun 2017 @ 6:22pm

    that 43M

    Is that $43M going to pay for the shipment of mechanical copies to complete Spotify's library?

    Or does mechanical not mean that any more?

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

  • icon
    TechDescartes (profile), 5 Jun 2017 @ 7:39pm

    "Licensing FUD: It's a feature, not a bug."

    Said every record company executive ever.

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

  • identicon
    My_Name_Here, 5 Jun 2017 @ 8:40pm

    Not Complex in this case

    The question is actually pretty simple: Is a music streaming service really that different from a radio station or for that matter a juke box?

    At the end of the day, Spotify (and other online music services) would be hard pressed to come up with any argument that would make them exempt. As such, they need to get to negotiating and paying as everyone else who makes money from an artist's music does.

    "on the internet" doesn't mean "shirking responsibility" or somehow being deserving of an unfairly sloped playing field.

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

    • icon
      PaulT (profile), 6 Jun 2017 @ 12:56am

      Re: Not Complex in this case

      "Is a music streaming service really that different from a radio station or for that matter a juke box?"

      Well, those are 2 completely different things in numerous ways, are you trying to say they're directly equivalent? Anyway, generally speaking - yes, they are that different.

      A radio station plays a song not usually chosen directly by the listener, and then broadcasts it to hundreds or thousands of listeners. Spotify takes a song directly chosen by the listeners and plays it once to one person. There are some times where that's not true (a radio request show or a person playing Spotify at a party), but they are completely different functions under normal operation.

      A jukebox is usually located on commercial premises and played to a group/crowd of people as part of said business. Most Spotify plays are not (although, of course, this can happen).

      So, while there are cases where they're similar, the normal mode of operation is completely different.

      "As such, they need to get to negotiating and paying as everyone else who makes money from an artist's music does."

      They did, and everyone thought they were compliant. Until someone thought of something else to make them pay for. Nobody seems to be able to agree as to whether this licence is even applicable, if you read the background here, Spotify simply didn't want the court battle to prove that it wasn't. So, it's still unclear as to whether any other company actually needs to pay it, the company with the deepest pockets simply decided it would rather settle.

      You don't see a problem with that?

      ""on the internet" doesn't mean "shirking responsibility" or somehow being deserving of an unfairly sloped playing field."

      It also doesn't mean that the industry who failed to take advantage of the internet when they had the chance gets to make shit up for companies to pay when they don't feel the internet is giving them enough.

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

      • identicon
        My_Name_Here, 6 Jun 2017 @ 2:30am

        Re: Re: Not Complex in this case

        No matter how painfully you try, you end up at the same place: Each of those things play recorded music for a user or group of users. Each of them makes income for doing so, either through direct payment (juke box), advertising, subscription fees, or other methods. In each case, they use the reproduction of the music in question as an income source.

        You can go through a lot of hoops trying to point out how they are different, yet they are clearly the same basic concept, playing music for users that the users do not have to own the rights to. The mode of operation isn't very relevant, unless of course you are trying really hard to bury a discussion into meaningless sidelines.

        "They did, and everyone thought they were compliant. Until someone thought of something else to make them pay for. "

        Actually, radio and jukebox companies (as examples) have been paying this for ages. Why should "on the intenet" be different?

        The true nature of the disagreement for all royalties in relation on internet music providers is methods to calculate actual listeners and the value of each "play". Spotify's lawyers probably figured out that fighting a losing battle on the issue was pointless, and it was better to come to a settlement and an agreement on licensing fees that makes sense and allows the company to move forward with a product that consumers seem to like.

        "It also doesn't mean that the industry who failed to take advantage of the internet when they had the chance gets to make shit up for companies to pay when they don't feel the internet is giving them enough."

        This is where you basic logic flaw lies. There is nothing that says any industry has to take advantage of the internet in a way the is convenient for you personally, or meets your personal standards. One of the joys of licensing is that rights holders and creators can let others get their hands dirty with the nitty griity of a give delivery method. The creators can spend their time creating rather than spending their time trying to figure out the best upstream providers for their streaming music venture.

        The idea that deciding not to be part of online music companies (most of which have failed) somehow negates the rights of the creator is pretty arrogant, even by your standards.

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

        • icon
          DB (profile), 6 Jun 2017 @ 10:37am

          Re: Re: Re: Not Complex in this case

          As a reminder, radio stations pay 0 (zero) performer royalties in the U.S.

          They do pay songwriter royalties, although only a small fraction of those payments end up going to the actual songwriters.

          There is no underlying principle of fairness to the artists. Royalties are only about who has the power to extract them at the time they are negotiated. If bringing up the image of a "starving artist" helps, it will be used as a pretense.

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

        • icon
          PaulT (profile), 7 Jun 2017 @ 12:40am

          Re: Re: Re: Not Complex in this case

          "Actually, radio and jukebox companies (as examples) have been paying this for ages"

          Mike states that you are utterly wrong about this. Do you have a citation for your claim, because I'm obviously more willing to go with the guy who's known to back his claims up rather than the anonymous guy who never does?

          Ball is in your court. With your track record, I will assume you've been caught lying again, unless proven otherwise.

          "There is nothing that says any industry has to take advantage of the internet in a way the is convenient for you personally, or meets your personal standards"

          There is also nothing that says that if an industry fails and loses a lot of money because they can't take advantage, that the people who do succeed owe them a penny.

          You also, of course, ignore the central problem here. You don't deny that Spotify have been doing what they can to comply with licencing, they just happened to miss one that not everybody agrees should apply to them. Does this not indicate a massive problem, if the US licencing system is so complex that an honest actor that's compliant with licencing in all other markets can completely miss out an entire licencing method from its portfolio?

          "The idea that deciding not to be part of online music companies (most of which have failed) somehow negates the rights of the creator is pretty arrogant, even by your standards."

          Good thing I didn't say that, then. Seriously, stop making shit up.

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

    • identicon
      Anonymous Coward, 6 Jun 2017 @ 1:09am

      Re: Not Complex in this case

      Actually, "on the Internet" has allowed your Prenda Laws, Malibu Medias, Guardaleys and so on to get away with automated bots that sue victims for easy money.

      There's an unfairly sloped playing field, but most rational people are honest enough to see who it's tilting towards.

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

    • identicon
      Anonymous Coward, 6 Jun 2017 @ 3:22am

      Re: Not Complex in this case

      And that's the problem... Spotify is not ON that field, it's on the front yard of the neighboring house.

      A radio station and jukebox both have the same general goal, to play a set of songs for a group of people. A average person has little/no control over a radio station (especially given the regulations for it and the physical distance between the listening group.) and would not even own a jukebox.

      In contrast, when the average person is playing music on Spotify, They usually play it for only them. The song set is easily changeable and arguably under user control.

      And then there is that fast that Spotify would logically be exempt on quite a bit of the regulations for radio transmission, due to not actually transmitting over radio.

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

    • icon
      Mike Masnick (profile), 6 Jun 2017 @ 11:33am

      Re: Not Complex in this case

      The question is actually pretty simple: Is a music streaming service really that different from a radio station or for that matter a juke box?

      If that were actually the question, then the above case would have ended differently, becuase neither radio nor jukebox operators pay mechanical licenses...

      So... not sure your point?

      At the end of the day, Spotify (and other online music services) would be hard pressed to come up with any argument that would make them exempt.

      Well, since you've already falsely claimed that radio and jukeboxes pay mechanicals, I find it kind of hilarious that you now claim Spotify couldn't exempt itself from the same requirements. If Spotify had the same requirements as radio it would pay SIGNIFICANTLY LESS.

      "on the internet" doesn't mean "shirking responsibility" or somehow being deserving of an unfairly sloped playing field.

      On the internet means paying many more licenses than the examples you gave.

      Now... let's see if you'll admit to being wrong.

      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, 5 Jun 2017 @ 8:53pm

    You're certainly consistent with major court cases: every one, you don't see any merit to copyright, and get wrong.

    Remarkable, really. You'd do far better by flipping a coin.

    Evidently lawyers were able to see their way through the "swamp", and so clearly that Spotify paid up.

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

    • identicon
      Anonymous Coward, 5 Jun 2017 @ 10:46pm

      Re:

      out_of_the_blue just hates it when due process is enforced.

      Don't worry though. We've been keeping tabs on the major court cases involving Prenda Law, Malibu Media and Perfect 10. And guess what, Techdirt was right, every time.

      How's that campaign of yours to get fair use banned coming along?

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

    • identicon
      Anonymous Coward, 6 Jun 2017 @ 1:57am

      Re: You're certainly consistent with major court cases: every one, you don't see any merit to copyright, and get wrong.

      Evidently lawyers were able to see their way through the "swamp",

      The need for lawyers to decide what the law says is the problem that keeps the swamp all squelchy and sticky.

      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, 5 Jun 2017 @ 9:08pm

    Having read elsewhere, now understand why Ma snick can't bear to even mention "Cassandra Fairbanks, a journalist and outspoken supporter of President Donald Trump".

    RE https://www.techdirt.com/articles/20170602/17495337508/that-lawsuit-about-tweet-is-both-publicity-st unt-attack-free-speech.shtml


    "But I'm not naming her in this story." Sheesh. Just irrational and childish from "Rumpelstiltskin" Masni ck.

    His lousy nameless "journalism" conveys no more than bias: he so scrambled the story that I didn't figure out the point.

    Read this take and compare:
    Fake News Gets Bad News... Victim Sues Over "White Supremacy" Hit Piece
    http://conservativetribune.com/fake-news-bad-news-victim/

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

    • identicon
      Anonymous Coward, 5 Jun 2017 @ 9:48pm

      Re: Having read elsewhere, now understand why Ma snick can't bear to even mention "Cassandra Fairbanks, a journalist and outspoken supporter of President Donald Trump".

      Said the moron too stupid to reply to the proper post. Impressive.

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

  • icon
    PaulT (profile), 6 Jun 2017 @ 12:45am

    Spotify have tried to jump through every hoop to be compliant with licencing law, taking great pains during every phase of their existence to comply with every market they expanded to. Their reward? Made the scapegoat for music industry failures by every moron who can't tell the difference between a purchase and a single play rental, their paying customers attacked as freeloaders, and still sued over licences nobody thought they should actually need.

    No wonder so many services and customers don't bother even trying to comply.

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

    • identicon
      Anonymous Coward, 6 Jun 2017 @ 4:57am

      Re:

      Indeed, and as the article alluded, surely Harry Fox should bear some of the heat from this? The whole point of paying 3rd party companies to handle convoluted licencing / royalties / copyright is that they are supposed to be the experts in that area leaving you to get on with your job.

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

    • icon
      Ninja (profile), 6 Jun 2017 @ 6:59am

      Re:

      And yet it's managing to remain afloat because streaming services are so damn popular due to the ease of use. I started using one and I only revert to piracy if I can't find the song I want (pro tip: this is lost royalties to the owners of the copyright so why not license for sane amounts?).

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

      • icon
        PaulT (profile), 6 Jun 2017 @ 7:45am

        Re: Re:

        Exactly. "Better and easier than piracy" was always the biggest seller in my experience. Yet, from trying to ramp up their prices to restricting their catalogue through date and region, the recording industry seems hellbent on driving people back to piracy.

        They still seem set on the delusion that people will still buy full albums when all they want is to listen to a single song a few times. That time is long gone, and it's gone because people actually have a choice now, not because there's something fundamentally different about today's consumer.

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

  • identicon
    Pixelation, 6 Jun 2017 @ 8:06am

    What will be interesting...

    What will be interesting to see is where the money ends up.

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

  • identicon
    bob, 6 Jun 2017 @ 8:51am

    but think of the (lawyers' ) children!

    If the messed up system was fixed then the lawyers would be out of work.

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

  • icon
    Gwiz (profile), 6 Jun 2017 @ 6:19pm

    Props where due

    ...musician/songwriter/Techdirt-hater (with a few perhaps surprising exceptions) David Lowery...

     

    I've disagreed with most everything David Lowery has ever argued, but I will give him the respect he deserves for standing with Techdirt in their fight for journalism and the First Amendment.

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

    • identicon
      Wendy Cockcroft, 7 Jun 2017 @ 7:16am

      Re: Props where due

      Ditto. I have personally thanked him for standing up for freedom of speech.

      Now we just need to get him on board with alternatives to licencing music so he can make a decent living from his art.

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

      • icon
        PaulT (profile), 7 Jun 2017 @ 7:58am

        Re: Re: Props where due

        Hmmm... I was unaware of that, given that I never visit anything associated with him, largely because I'm aware of the falsehoods and caustic attitude that he brings to a great many discussions. But, bravo on doing something positive, and so publicly to boot!

        I wonder if his fan club can be so fair and open minded in this arena?

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

  • icon
    That Anonymous Coward (profile), 8 Jun 2017 @ 1:03am

    If you look at the RIAA lobbying, you can see why Congress just bolts more crap on rather than fix it. The "leaders" of the industry are telling them about the loss of kajillions of dollars because some people are hearing 3 notes without having paid. The RIAA still thinks the internet is a fad thats gonna go away any day now (and with what the FCC is doing...) so there is still no reason to admit the world changed decades ago & they didn't adapt.

    It is really past the time when copyright needs an overhaul & not just some more crap bolted on to protect a cartoon mouse and the income for a 1 hit wonder for the next century.

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


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