Spotify hit with dodgy $1.6B lawsuit

Here's something you don't see everyday: a big music publisher suing Spotify for allegedly streaming "thousands of songs" from artists like Tom Petty, Neil Young and more without paying.

Apparently Spotify subcontracts licensing work to a third-party, which seems like a properly short-sighted decision if you're a music company, which dropped the ball here — but the story is not what it appears.

The actual issue at hand isn't that Spotify didn't have a license at all, it's that Spotify attempts to force music publishers into using a different kind of license entirely called a "public performance" license. 

The music industry is a complicated machine with many different license types. Spotify has blanket "public performance" licenses for music but does not buy "mechanical licenses" — the different is vast, and important here.

Mechanical licenses are an old-industry term invented when CDs, tape cassettes and other forms were prevalent. If you wanted to reproduce music on a CD, you'd buy the mechanical license — but in the digital world that's obviously irrelevant. 

Music publishers want Spotify to pay mechanical licenses because they cost a ton more and require deep amounts of information on how widely they're used.

Spotify has had this exact type of lawsuit before, which is still ongoing, and argues that it's not 'reproducing' anything. Instead it's playing it as a performance, and the user never owns a copy, therefore the other license applies — which seems sane.

Look, the actual problem here is the music industry are dinosaurs, with few publishers coming to the party with relevant licensing schemes because they're scared by Spotify's scale. Spotify may not pay fairly, but it also doesn't seem to have many actual options.

The reality here is Spotify's not going away anytime soon. Provided it's not suffocated by losing a lawsuit, it plans an IPO this year and it's clear the success of streaming is here to stay — the industry, however, would like to preserve its profit piles as long as possible.

Unfortunately, the headlines are a little overzealous here. I suspect Spotify will either win or settle this successfully, and as The Hollywood Reporter points out, a new piece of legislation partially resolves this.

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