Google Play, Tidal, and Slacker Radio all have something in common with Spotify, and it isn’t that they’re music streaming services. It’s that musicians, who claim their music is being offered for streaming without licenses or royalty payments, have sued them this year for copyright infringement. Spotify was first sued late last year by David Lowery of Cracker and Camper Van Beethoven, and then another musician, Melissa Ferrick, filed suit this January.
Yesh Music and John K. Emanuele of American Dollar are the plaintiffs in the suits against Google Play, Slacker Radio and Tidal, which are class-action complaints. While they were all sued within weeks of each other, the Tidal one really stood out because it is owned by a musician—rapper and mogul Jay Z, and was promoted as having a business model that was more favorable to musicians than the other streaming music services, because there wouldn’t be a free version available to customers, which meant more money for artists. Last year, Jay Z even tweeted that Tidal pays a 75% royalty rate to musicians.
Section 115 of the Copyright Act explains the process for obtaining a license for musical works in exchange for the payment of royalties. Under the law, a license seeker can get a compulsory license by serving a notice of intent (NOI) to the copyright owner before making the music available to the public. If the license seeker doesn’t do this before distributing music, it voids the compulsory license and the distribution of the music becomes actionable as infringement. The suit claims that Tidal’s catalogue contains 118 American Dollar songs that were included without permission because never went through the process of filing NOIs and, therefore, did not get compulsory licenses.
The plaintiffs also accuse Tidal of miscalculating the per-stream royalty rate by “including millions of streams defendants do not pay royalties for in the calculation,” and through dealings with investors. Currently, royalty rates are abysmal, something that David Lowery has been outspoken about since the rise of digital. Like other streaming services, Tidal uses a third-party company to acquire licenses and distribute royalties but, as plaintiffs point out, the agency Tidal uses has been accused of mismanagement before; this is also the company that Spotify uses. In response to the suit, Tidal has publicly stated that it is fully up to date on its royalty payments, and that the plaintiffs are pursuing the wrong target because Tidal has paid out royalties to the company that controls plaintiffs’ music.
So why are these royalty and license issues popping up now, anyway? While the digital revolution has made access to music easier and faster, it has also created problems that weren’t there when music distribution was primarily physical or even just digital downloads. More often than not, big record labels were behind releases, which made it simpler to track down copyright holders. Royalty payments were also streamlined. Now there are individuals releasing music on their own and through independent labels, which can make finding the rightful copyright holder and serving NOIs difficult; the rise of streaming also means an entirely different model is required for royalty calculation and payouts.
Apple Music now has 10 million subscribers and Spotify is in the 25-30 million range. Therefore, streaming has become a popular way for consumers to receive music, and it’s royalty source artists should anticipate getting paid from going forward, so the notice and royalty system needs a lot of overhaul, if streaming is to be the future of music distribution. First, every attempt needs to be made to track down copyright holders before music is added to a streaming site’s catalogue, and should be verified periodically. Second, better monitoring practices should be in place to connect streams to rights holders. The practices should probably also become standard across streaming services. Otherwise, they will all be facing more of these lawsuits.
Stay tuned to The Fried Firm blog for updates on streaming music and royalties.