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A $1.6 billion Spotify lawsuit is based on a law made for player pianos


sixoclock

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Spotify is finally gearing up to go public, and the company’s February 28th filing with the SEC offers a detailed look at its finances. More than a decade after Spotify’s launch in 2006, the world’s leading music streaming service is still struggling to turn a profit, reporting a net loss of nearly $1.5 billion last year. Meanwhile, the company has some weird lawsuits hanging over its head, the most eye-popping being the $1.6 billion lawsuit filed by Wixen Publishing, a music publishing company that includes the likes of Tom Petty, The Doors, and Rage Against the Machine.

So, what happened here? Did Spotify really fail to pay artists to the tune of a billion dollars all the while losing money? Is digital streaming just a black hole that sucks up money and spits it out into the cold vacuum of space?

 

The answer is complicated. The amount of money that songwriters are making through streaming services like Spotify is oddly low, but the Wixen lawsuit itself exists in a bizarre universe of convoluted legal provisions that have very little bearing to fairness, common sense, or even how the technology actually works. And as Spotify’s IPO filing notes in its section on risk factors, the company is dependent on third-party licenses, which makes its business model especially vulnerable to any hiccups in the bureaucracy of music licensing.

 

Spotify is being sued by Wixen because of mechanical licenses — a legal regime that was created in reaction to the dire threat to the music industry posed by player pianos. Yes, the automated pianos with the rolls of paper with punch holes in them.

 

But that’s not actually the weird part. The weird part is that Spotify is fundamentally being sued for literal paperwork: Wixen says Spotify is legally required to notify songwriters in writing that they’re in the Spotify catalog — a fact that escapes probably zero songwriters today. A paper notice requirement made sense in the age of player pianos when songwriters could hardly be expected to keep track of every player piano roll in the country. It makes no sense in the age of Spotify, Pandora, and Apple Music. The question of what would be fair to pay artists is a contentious one, but the story of Wixen v. Spotify is not so much about paying the artists. It’s really a story about how, in a time when services, labels, and artists have never been better poised to work under a centralized, automated system for licenses and royalties, everyone keeps punching themselves in the face instead.

 

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