The bombshell dropped on Big Tech today when it was reported David Lowery filed a $150 million dollar class action lawsuit against Spotify. In response, Spotify has released a statement:
"We are committed to paying songwriters and publishers every penny," says Spotify global head of communications and public policy Jonathan Prince in a statement. "Unfortunately, especially in the United States, the data necessary to confirm the appropriate rightsholders is often missing, wrong, or incomplete. When rightsholders are not immediately clear, we set aside the royalties we owe until we are able to confirm their identities. We are working closely with the National Music Publishers Association to find the best way to correctly pay the royalties we have set aside and we are investing in the resources and technical expertise to build a comprehensive publishing administration system to solve this problem for good."
And while it is correct to say that Spotify is working wth the National Music Publishers association while also investing the money, the class action lawsuit alleges the company "knowingly, willingly, and unlawfully reproduces and distributes copyrighted works without obtaining the proper mechanical licenses," with the operative words in that sentence being "knowingly" and "willingly."
With Spotify's response above, we reached out to Mr. Lowery to see if he had anything to say beyond the press release, and we spoke as he was on the road somewhere between King City and San Francisco en route to another Cracker/Camper Van Beethoven show.
My first question concerned the number of songwriters who may be missing royalty payments owed to them by Spotify. A class-action lawsuit, by definition means a hundred or more parties. "The class is actually larger than that," he said. "Part of it is you go through the discovery and figure out what it is (and how many are affected). As far as artists or songwriters that haven’t been paid royalties from Spotify it could be hundreds of thousands." Considering Spotify has more than thirty million songs within their category, it's a believable number.
And while Taylor Swift made headlines pulling her last album from Spotify, Lowery is quick to point out the major stars have major labels that handle (read: enforce) their licensing. "It’s likely that the biggest most popular songs are probably with the major publishers and there’s probably some contracts that are covering them…it’s going to be lesser known artists mid-range artists," who aren't seeing any royalties. Without the luxury of a major-label, he says, it's hard for an artist to keep track of what is due them. "Songwriters are songwriters. Their business is writing songs, not auditing royalty statements."
Lowery is probably a lot more astute than other artists about this process, but even he was surprised to discover songs from his last Cracker album found their way to Spotify despite not having been licensed in one of two ways. The first way is negotiating directly with the record labels. For the songs themselves, they (Spotify, et al) can get a license two ways. "They can file what’s called a notice of intention and they automatically get an automatic compulsory license. Or they can come to me directly and try to get a direct license. And (Spotify) did neither of those things. They can get a license for any song as long as they do what section 115 of the copyright act tells them to do. So I was trying to figure out if they had done that and I had somehow missed it."
And after scrutinizing carefully, Lowery came to the conclusion that they didn't exercise a compulsory license or send an notice of intent, or negotiate with him directly. Nor was he an anomaly.
He realized there were many being burned. Even record labels. Like Victory Records, a Chicago-based label home to such bands as Taking Back Sunday and Hawthorne Heights whose catalog was pulled from Spotify over claims the company owes publishing revenue from over 53 million streams. The songs were later reinstated, but not before the damage was done. Lowery kept talking to more artists. "And it just seemed like this was really wide spread and there were a lot of artists and songwriters like me who were in exactly this situation and this is exactly what class action lawsuits are for, to resolve these kinds of situations."
Lowery believes this mess is a byproduct of Silicon Valley's culture where
"...you go out and do something and then try to figure out how to get the permissions and licenses later. They even brag about this. They call it permissionless innovation. I’m sorry, but most Americans, they go to work, they go about their day, and they follow the rules. Why are these guys any different? Why do they get to not follow the rules? That’s just not right."
When I point out that these kind of situations have existed in the recording industry well before streaming, Lowery mentions Elliott Spitzer. Back in the early 2000's "The record companies had a pending unmatched problem which means they had royalties due and they didn’t know who to pay it to. Sound familiar? (Spitzer) came in and basically with the force and authority of the law created a settlement, got people paid and to this day the major record labels follow the rules that were set in that judgment."
That judgment is still being enforced. "If you go to the major record labels websites there’s usually a link somewhere on the main page to unpaid royalty sections where they publicly publish who they have royalties due and that’s a requirement of the settlement so these are the kind of things its money it’s more than a slap on the wrist so people don’t do this again." The total amount of back royalties the recording industry owed musicians when the case was settled in 2004 was 50 million dollars. Spitzer also took on payola, causing large settlements in 2006, to try and curb the pay-to-play mafia style scheme of getting music on the radio. In other words, there's a history of enforcement. And why shouldn't there be? Why should Spotify or any company, Tech, Silicon Valley or otherwise, get a pass?
As for the 150 million attached to the class action lawsuit against Spotify, Lowery is quick to point out that the money is on behalf of the class. "The amount of effort I’ve put into this, if I make minimum wage at the end of the day I would be surprised. The reason the number is so big, and this is the key thing—is that it appears from statements in the press and other indications that we have is that Spotify knew they were using these songs without licenses. The number is so big because it becomes willful infringement so there’s punitive damages attached to that." And with potentially hundreds of thousands owed, it's easier to see this as doing what's fair for all.
Despite his reputation for rallying against the big tech companies, Lowery is optimistic that there will be a "fair ecosystem," for musicians and companies alike.
"Nobody’s against streaming as a technology. This is obviously the future. But companies in the streaming space that don’t follow the rules need to be held to account. You have to separate streaming and the technology from the companies and the individuals. We tend to personify technology these days. Technology’s just a thing. We’re talking about companies here."
In other words, don't confuse the brand with the category.
Lowery hopes that in ten years the streaming companies will look back at this point as a reset button for the way in which musicians and tech companies worked together. Perhaps a new era of ethics and standard operating procedures and accountabilities that we've come to expect or demand if need be from every other industry. Not to mention transparency. Which is essentially the whole point of doing it through federal courts. What Lowery doesn't want to see is a private settlement, or accountability without transparency, where "some people get more, some people get less and some people get nothing."
My own take is that Spotify has opened a Pandora's box they can't close without help. (Sorry, Pandora, you named your company, not me.) If Spotify is found liable, making one lump settlement in a class-action lawsuit is surely a lot more palatable than potentially a hundred thousand lawsuits from disgruntled musicians and indie record labels destroying their brand year after year. Kind of like Volkswagen's cheating on emissions. Better to rip that band aid off and apologize to all and close the case in one go than apologize to each one individually. It's the difference between a PR hiccup and a PR nightmare.
Since most people who dare question the brilliance of tech companies who evade taxes or worse generally get branded all kinds of things by arrogant Silicon Valley elitists, I ask if Lowery's concerned about the backlash.
"Pundits will say he’s a Luddite, etc. But you know what? Who cares. Do I look like a guy who gives a shit about that?"