Spotify LawsuitHey music world! Today I’m touching on one of my favorite nerdy music topics ever, so you’re in for both a hell of an argument and a long-winded one. DEAL WITH IT.

News broke last week that Spotify is being sued by Wixen Music Publishing for distributing their clients’ content without a proper license. They are seeking damages in the form of $150,000 per song for over 10,000 songs, totaling to a whopping $1.6 billion. Read the links for more background if you need it. In the meantime, I’m gonna’ jump right into the nitty-gritty details of the case, and more specifically the holes I want to poke in it.

The Money

My first problem with this case is the money requested. Being that it’s an intangible asset, unlawful use of digital content is difficult to translate into dollars and cents. The argument for damages in this case is that the music wasn’t supposed to be on Spotify, and Wixen says they would’ve made “X” amount of money selling the music if it wasn’t wrongly available on the streaming service. Because music consumers could access this content on Spotify, that directly [allegedly] led to Wixen losing out on those profits.

billiondollars

That’s where the $150k/ x 10(ish)k songs = $1.6B figure comes from – the sue-er in a case like this will often demand an inflated amount to make it sound like this was an economically egregious offense. In a similar case, the RIAA asked for $75 TRILLION (yes, with a T) in their suit against LimeWire in 2011, a time when the entire wealth of the world was only estimated at about $65 trillion. To me, this sounds like a money-grabbing effort. It’s a scare tactic to get them to settle for a lesser, but still inflated amount.

The Copyright

The second red flag in the lawsuit is the argument over approved-license use of the copyrighted material. Generally speaking, there are two forms of protection for any given piece of copyrighted content: protection of the artistic essence that makes an original work, and the protection of produced copies of the original work – so in the case of music, these are defined as the composition and the recording. In the initial complaint of the case, Wixen argues that Spotify established a license to use the recording, but not the composition (pg. 6 line 18). Because streaming is still relatively uncharted territory in copyright law, there’s been some dispute over how these terms are applicable in a streaming contract, and more importantly how it’s possible to infringe upon them as a streaming service.

The Contract

Wixen Music PublishingThe composition argument seems questionable because there’s clearly an established contract for Spotify to license the material at hand; they’re not just blatantly stealing and using the music without consent (visa vie Wixen’s approval of the recording use).  So, that means that upon the signing of the contract for the recordings, both sides were aware of the fact that Spotify would be presenting this music on their service. So, why would Wixen approve just the recording, and not the composition if they knew it might cause an infringement situation? Did this slip through the cracks and they just found out about it? Or is it more of a personal jab  because older record execs who used to make a lot more money on music sales feel jaded about how the internet has changed the recording industry?

If I’m being completely impartial in this analysis, I have to admit that I am not a certified Intellectual Property attorney and there could be something here that is going over my head (however I believe if nothing else, I’m close to the root of the problem). I also haven’t read the contract, so I don’t know what the exact verbiage is or how it may have been misinterpreted or ignored by Spotify, and it’s possible that they actually are breaching the contract. (There’s no way to know this until the case closes and the contract becomes available as public record. If I’m wrong and you somehow miraculously found the contract, I’d LOVE to see it. Seriously, this stuff is like porn to me).

It’s possible there might not be as much malice in this lawsuit as I’m implying here, but the details just seem fishy. This is a routine agreement for Spotify at this point that should’ve easily gone off without a hitch, or at least been amended at some point to avoid this situation. They’ve established contracts with major organizations much larger than Wixen to license music, and it doesn’t make sense that this problem would just show up out of thin air as a result of some contract error.

The Character

All of this leads me to believe that there is a sense of malice on the part of the Plaintiff. It’s also a red flag for me that almost all the artists represented by Wixen in this case started their careers in music well before the internet and streaming entered the industry (Tom Morello, Tom Petty, Donald Fagen, Neil Young, Stevie Nicks, etc.). This leads me to think that the company operates with the ideals of the golden age of the record industry before they had to worry about losing their product over the internet (and a time when they made a lot more money from it).

Spotify’s lawyers have also implied that Wixen essentially brought up the legal action on its own volition without request from its clients. It’s arguable that a publishing company should be expected to monitor instances of potential copyright infringement on behalf of its clients, but it seems unconventional that they would actively drag them into a lawsuit without approval. Another tally for the money theory.

The [Potential] Result

As tragic as it is, our American Capitalist society is rather keen on using litigation as a means to damage or even eliminate competition. In addition to the aforementioned $1.6B that Spotify now has to fight, they’ll also have to put up with massive sums in court fees, attorney costs, litigation discovery and production costs, etc. etc., and not to mention a major distraction from their day-to-day operations. For a company that is already struggling with licensing disputes, this is a huge hurdle if they have to pay the proposed damages. Also, you can imagine what it could do to their impending IPO and potential stakeholders’ interest in investing.

Spotify running

Why It’s Bad

lawsuits comicMy ultimate fear this suit inspires is that big-wig corporate execs who wouldn’t care if they were selling music or cow shit are just trying to swoop in and grab all the money and market share that they can. In this instance, Spotify has found a niche in a developing channel of the industry that Wixen doesn’t or can’t compete in, and they’re losing money as a result. Feeling helpless in a constantly evolving world of music and commerce, they pull the only card they can and try to sue them into the ground.

Of course, I’m being a little dramatic about it here, but that’s the blunt description of the increasingly teetering and delicate pinpoint the music industry currently stands on. If you couldn’t tell, I’m one of those ‘art over money’ people, and I strongly believe that it’s in music’s best interest to strictly limit money and business as a facilitator, not an end goal. Companies like Spotify are the closest working solution we have to giving consumers this ultimate access of content that we’ve become accustomed to and having us actually pay for it. It’s not a perfect system, but it’s better than any alternative currently available.

I also don’t pretend Spotify isn’t a major corporation in its own right. You can’t deny that a $20B valuation earns it that title. The difference, however, is that Spotify’s business model is designed to help the world share music with each other, and Wixen’s is to own and restrict access to it.

What Could Happen: The Doomsday Perspective

I’ll paint you a colorful doomsday picture here, since writing this has put me in that kind of mood.

Los angeles doomsday

The year is 2023. Cracked pavement and rolling tumbleweeds garnish the barren landscape of what used to be known as downtown Los Angeles. Abandoned cars and decaying bodies clutter the streets, existing as some of the only remnants that tell the dark and perilous tale of what has since become known as The Great Music Apocalypse. Few survivors are scattered across the city, having secured forts and an intricate tunnel system that shifts with the constant crumbling of office parks and bodegas. They spend most of their time scavenging boarded-up record shops and night clubs for any objects reminiscent of a more musical time in history, and how they miss it so. If you’re lucky, you might find a second-generation iPod shuffle buried in a donation box in the back of an abandoned Good Will. Couple that with a generator and the 32-pronged Apple charging cord you dug out from the back pocket of a retro-lifestyle blogger’s remains, and you’ve finally found yourself the sweet serenity and joy of musical bliss. You won’t even care what you find on it because even the painfully generic crush-guitar sounds and dad-rock stylings of Nickelback will serve to soothe the soul today.

What could possibly lead to this desolate, sad, musicless world is a decision in a case like this that would set a precedent for favoring a business model that restricts content and charges a premium for it rather than one that supports the inevitable access of the internet. And, if Wixen wins this case, it might inspire other licensing companies to follow suit in pursuing similar damages. It’s true that Spotify doesn’t pay much to artists who host music there, but it’s also true that the individual item purchase model is declining in the internet era. If a business like Spotify was restricted in the way companies like Wixen want them to be, it very well could put Spotify out of business with the additional costs they’d incur. This could include charges like higher licensing fees, percentage dividends to rights holders based on revenue thresholds, shorter timelines covered by the license, or some combination of multiple of these and other factors.

If Spotify, and every other streaming service remotely like it, were to go close their doors for good, the music industry could totally flip over. Since streaming continues to grow as a major outlet for music consumption, there’s a growing dependency on its services for music consumers to stay engaged. If this outlet was eliminated, it’s entirely possible that consumers would have a hard time adjusting back to a more transactional model (i.e. paying for each individual song or album). The serious music fans would likely keep up, but engagement of the greater mass of average music customers would plummet.

music streaming servicesThis would also mean that musicians wouldn’t have the same reach as they currently do. The average music listener just isn’t as likely to buy an entire album from a band they’ve never heard of. They are much more likely, however, to listen to a new band’s album on Spotify and become a fan. So, if streaming goes away then fandom and audience growth go down. Concert attendance and merchandise sales would go down. Thus, it would be increasingly more difficult to operate as a small, unsigned band and maintain even a break-even profit model. This would lead to a great drop in artists actually producing art, and we all suffer this consequence as the music industry spirals in a swirling vortex down the drain.

In Closing

It’s my hope that the holes I detailed at the beginning of this piece will result in the case falling through or at least settling for a much smaller amount. It’s also my hope that this will prevent the possibility of my (admittedly exaggerated) doomsday prediction. To give Wixen some credit, I completely agree that the current model for how Spotify pays for it’s content is not sustainable. I don’t have a solution, but I believe that it’s better to work in that direction than to just gut them for the money Wixen believes to be owed. Maybe Spotify will have to raise its subscription rates. Maybe they’ll have to charge more for different streaming packages that separate access to different artists, similar to how TV networks offer content (or channels) through outlets like Comcast and DirecTV. Whatever happens, I just want what’s best for music: the sustainable ability to listen to it and its growth as an imperatively valuable attribute to modern culture.

If you’ve got some opinions on the case or the possible ideas of how music business might develop, let me know in the comments!

 

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