Spotify lawsuits likely won't stop its big plans for 2018
You'd think a $1.6 billion lawsuit might derail a company having trouble turning a profit and about to go public.
Not so much.
Spotify is all systems go for its upcoming and unorthodox public offering, in which the company will start start publicly trading its shares on the New York Stock Exchange in an unorthodox direct listing arrangement.
Despite the lawsuit, the company has enjoyed a run of good news. Last week, Spotify announced it had surpassed 70 million paid subscribers, drubbing the competition. Apple Music, in second place, has 30 million subscribers. Before that, Spotify signed new deals with record labels that provided the streaming music company with a better cut of the money it brings in through subscribers and advertising -- a major step toward profitability.
Heck, it even made peace with Taylor Swift, which is no small feat.
SEE ALSO:Apple Music mogul Jimmy Iovine is reportedly leaving the companySome recent lawsuits, however, seemed to call some of Spotify's momentum into doubt. The copyright lawsuits, most recently a $1.6 billion suit at a whopping $150,000 per song, accuse Spotify of streaming some artists songs -- including those of the Black Keys' Dan Auerbach and Neil Young -- without paying for the licenses to use the actual composed works (think sheet music), known as "mechanical rights." (Spotify, however, got the necessary licenses for the sound recordings).
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When the dust settles in these legal battles, there's a good chance that Spotify will have to pay for its missing licenses (it already settled a $43 million suit).
That said, the streaming giant will survive. The crucial reason why is that Spotify's model already incorporates these payouts. In the case of these artists, Spotify just didn't have the right info to issue the payments.
"No, having to pay these licenses won't matter," said Robert Weitzner, an assistant teaching professor at Drexel University's Music Industry Program.
Weitzner says that around 70 percent of Spotify's revenue is already allocated to both record labels (that own sound recordings) and music publishers, which represent the artist's actual compositions (those "mechanical rights"). And included in this 70 percent is the money Spotify knew it would need to pay to artists.
"If they had been paying that all along they would have been [paying] from the same 70 percent," said Weitzer.
The problem -- as Mashable previously covered -- is that crediting all the songwriters for each song can be a tedious, convoluted process.
"They didn’t know who to pay," said Weitzer, because there's no centralized place to retrieve that information. "It's a mish-mash of places."
Still, Spotify is on the hook to figure out who to pay.
"It's incumbent upon Spotify to find that information," said Weitzer.
But they took too long -- or somehow overlooked matters.
Now that Spotify is getting sued for not paying specific artists, it might be difficult to simply fix the problem by acquiring the necessary licenses and back-paying for previously streamed songs.
Mashable contacted Spotify multiple times for comment and has yet to receive a response.
Spotify, of course, will put up a fight. The company originally said it couldn't find all the necessary information about the songwriting credits for many of the songs.
SEE ALSO:All it takes to destroy grunge rock is to play 'Smells Like Teen Spirit' in a major chordThough Spotify may end up having to pay money in a settlement or if they lose, it's unlikely these lawsuits will impact the company's desire to become a publicly traded company. The copyright infringements are in another legal realm.
"The copyright infringement lawsuits are answering a legal question about the new music frontier, and these won’t be resolved quickly," said Heidi Mayon, a corporate and securities lawyer at Gunderson Dettmer. "And for that reason I don’t think the litigation is going to have an impact on Spotify's ability to go public."
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