Spotify was served in federal court in Nashville with two new lawsuits for massive copyright infringement by parties represented by Richard Busch (who has a strong track record in the area). Based on the allegations in the complaint and reports about what appear to be breaches of Spotify’s recently concluded settlement with NMPA, it seems abundantly clear that when it comes to mechanical royalties, the company is simply not getting it done.
It must be asked, where is the board? Who is minding the store at Spotify? One conclusion that the latest litigation suggests is that Spotify’s future will be a lot like Napster–endless litigation from songwriters and publishers who are either not part of the settlements because they opted out or whose works were infringed recently and are not picked up by any settlement. This should give any board of directors pause–not to mention a gut check with their D&O insurance company.
But what about the songwriters who don’t want to go through the litigation maze and just want to be paid fairly when Spotify plays their songs? As long as Spotify takes a cavalier attitude–even in the face of massive litigation–no one can trust the company to do the right thing.
As Matt Pincus told the New York Times in a different, but relevant, context: “The more controversies [Spotify] have that have a moral underpinning to them, the more of a problem they will have in the bigger fight.”
Not only does Spotify have the “black hat” problem with songs and songwriters, they also make people wonder about their reporting and licensing on sound recordings and artists. If Spotify’s accounting on songs is so sloppy and the company is either so slow or so unwilling to fix themselves, how can they possibly be doing it perfectly on sound recordings?
There is a solution to this that one would think both sides would welcome–a court appointed federal magistrate to oversee an independent third party rendering Spotify’s royalty statements and handling its licensing. There is an apocryphal story that Goldman Sachs partners are under continual audit by the IRS by means of an IRS office inside Goldman. While that may seem oppressive if true, at least a Goldman partner would know that they were already clean with the IRS.
If a court ordered a federal magistrate to review Spotify’s royalty reporting for say the next 10 years, songwriters might actually get paid and the Spotify board and their insurance company could breathe easier. Not to mention the implicated employees.