Surprise! Spotify Says They Donâ€™t Owe Anything for â€˜Mechanicalsâ€™
Looks like Spotify has a totally different game plan for dealing with pesky publishers and songwriters. Â So you can take your â€˜mechanicalâ€™ license andâ€¦
If youâ€™re just tuning into this imbroglio, then welcome to the juiciest part.
Just this morning, Spotifyâ€™s lawyers decided that the â€˜mechanicalâ€™ publishing license doesnâ€™t pertain to them. Â Which means that all of these lawsuits related to mechanical licenses are basically BS (at least from their perspective).
Thatâ€™s right: Spotify is turning the car around. Â That is, despite settling previous mechanical licensing lawsuitsÂ for nearly $75 million. Â Guess that was Spotifyâ€™s tipping point: now, the company is battling back and calling the whole exercise a scam.
And yes, we have it in written court testimony.
Hereâ€™s what Spotify just argued in its massive,Â $365 million-plus lawsuitÂ involving Bluewater Music Services and Bob Gaudio from Frankie Valli and the Four Seasons. Â Those lawsuits are also focused on mechanicals, and considered the tip of a legal iceberg that could cross into theÂ billions.
Accordingly, Spotify is turning its handshake into a monstrous middle finger.
(Donâ€™t worry, Iâ€™ll translate the legalese afterwards).
â€œPlaintiff alleges that Spotify â€œreproduce[s]â€ and â€œdistribute[s]â€ Plaintiffâ€™s works, thereby facilely checking the boxes to plead an infringement of the reproduction and distribution rights. But Plaintiff leaves Spotify guessing as to what activity Plaintiff actually believes entails â€œreproductionâ€ or â€œdistribution.â€
The only activity of Spotifyâ€™s that Plaintiff identifies as infringing is its â€œstreamingâ€ of sound recordings embodying Plaintiffâ€™s copyrighted musical compositions.
But â€œstreamingâ€ â€“ by its very definition â€“ cannot infringe upon either the reproduction right under 17 U.S.C. Â§ 106(1) or the distribution right under 17 U.S.C. Â§ 106(3).â€
What this basically says is the following: the â€˜mechanicalâ€™ publishing license is all about reproduction. Â It was created to cover the actual reproduction of a song onto a physical medium (like a vinyl record). Â Streaming is a completely different format based on access, and it isnâ€™t â€˜reproducingâ€™ anything.
Therefore, Spotify shouldnâ€™t be paying anything for mechanicals.
So whoÂ isÂ reproducing in the digital age?
That would be any download-focused platform, including Appleâ€™s iTunes and pirate pioneers like Napster. Â Itâ€™s simple: streaming isnâ€™t downloading, so there.
â€œSpotify bears no resemblance to Napster. Â [I]t is likewise wholly unlike any other â€˜primitive illegal file sharing companyâ€™ (i.e., Napster, Scour, Aimster, Audiogalaxy, Morpheus, Grokster, Kazaa, iMesh, and LimeWire). Â Its business practices bear no resemblance to those piratical and unlawful peer-to-peer networks. Nor does its technology.â€
But what about Spotifyâ€™s $75 million+ settlements with the likes of the National Music Publishersâ€™ Association and a class action of independent songwriters? Â This seems like a shocking turnaround, except that those were settlements, not actual judgments. Â Which means the parties agreed to something without Spotify accepting a formal ruling or creating a legal precedent.
That part might be critical, because Spotifyâ€™s attorneys are now pointing to the court decisions thatÂ actually exist. Â And those decisions delineate between streaming and downloading.
â€œIn fact, courts have acknowledged a key distinction between streaming and downloading â€” like the downloading facilitated by the â€˜illegal file sharing companiesâ€™ that Plaintiffs reference in their Complaintâ€¦ If a service enables users to download a song, then that service engages in the â€˜reproduction and distribution of a sound recordingâ€™ and of the musical composition that sound recording embodies. But if the service streams a song, then the stream is an â€˜isolated public performance of a sound recording,â€™ and of the musical composition that sound recording embodies.â€
But what about my mechanical licensing settlement money?
Earlier, weâ€™ve published articles helping songwriters claim their piece of various Spotify settlements (see above). Â And those settlements clearly involved unpaid mechanical royalties. Â But now that Spotify doesnâ€™t think they should be paying those licenses, can you still claim your money?
Great question, but one without any answers at this stage.
But wait: is Spotify descrambling the entire fâ€”d up music industry as we speak?
Earlier, we questioned whether the music industry was making it impossible for Spotify (or any other music tech competitor) to survive. Â Not only is the mechanical license a huge stretch for streaming platforms, but the industry has completely failed to create a rights database that any entrant can reliably use.
The result? A totally murky set of rights requirements, and an even murkier set of information on who to pay for these licenses. Â Oh, and if you donâ€™t get it right? Â Hereâ€™s aÂ $365 million lawsuit to chew on.
Sounds pretty ludicrous, especially for investors. Â But by pushing back against the insanity, Spotify may be creating some clarity. Â For example: what about a clear precedent regarding mechanical licenses for streaming platforms? Â Now thatâ€™s a lasting contribution, folks.
Meanwhile, efforts are underway to create some sanity on the licensing database front. Â Earlier,Â ASCAP joined forces with BMI to create a centralized database of rights owners. Â But thatâ€™s just one of several efforts, not to mention royalty-related companies like STEM, Kobalt, Vydia, Audiam, Rebeatâ€™s MES, and Exactuals that are slowly injecting some order into the chaos.