Business News Digital Legal

Settlement agreed in Rhapsody mechanicals class action

By | Published on Tuesday 19 February 2019


Ah, mechanical royalty disputes. Remember them? They were fun weren’t there? Streaming got dull the day American songwriters stopped filing multi-million dollar lawsuits against the platforms. Anyway, a deal has been reached in a class action lawsuit that was filed against Rhapsody, the US streaming service that now operates as Napster.

As you may remember, most of the streaming services were sued in recent years over their failure to pay all the mechanical royalties that were due on the songs they were streaming.

In most other countries there are collecting societies that can help streaming services pay the royalties that are owed to songwriters, so that where a digital music firm doesn’t have a direct deal with a music publisher, it just pays the money to the relevant society instead. The society then takes responsibility for handing that onto writers and/or publishers.

This is an important service, because digital platforms don’t actually know what specific songs are contained in the recordings they are streaming, let alone who wrote them, published them, owns them and is due payment whenever they are played.

But in the US – while there are four collecting societies representing the performing rights in songs – there is no society for mechanical rights. Copyright law sets the rate that must be paid, but the service must work out what song has been streamed and who owns it, and then send that person or company paperwork and payment.

Most streaming services have outsourced this work to agencies, some of which did a better job than others in finding the rights owners and sending the paperwork. But in many cases the paperwork was not sent to at least some publishers and writers, which technically means the streaming services have infringed copyright.

All of which resulted in a load of copyright infringement litigation. Most of the services were sued, though the Spotify cases tended to get the most press. The lawsuit against Rhapsody, filed in 2016, included activist musician David Lowery as a claimant, who was also a lead player in one of the big lawsuits against Spotify.

In theory all these mechanical royalty lawsuits should be a thing of the past, because last year’s Music Modernization Act will set up a mechanical royalties collecting society Stateside for the first time. Which means, like in other countries, where services do not have a direct deal with a publisher, they will pay that new society, which will then be charged with the task of working out who the hell to pass the cash onto.

But any cases filed pre-MMA still need to be settled. Now the law firm that led on the Rhapsody case, Michelman & Robinson, says it has agreed a settlement with the digital firm. It was a class-action, which means other songwriters not paid royalties can also benefit. Though that also means that class members have an opportunity to object to or exclude themselves from the proposed settlement before it is formally approved.

According to Billboard, under the deal, any self-published songwriter with music that has been played on the Rhapsody (now Napster) service but who has not been paid their mechanical royalties will be able to claim $35 per song, providing the work is registered with the US Copyright Office. A dollar a song will be paid for unregistered works.

However, the total sum of compensation Rhapsody will pay is capped at $10 million (or possibly $20 million depending on future performance), so per-song payments could change depending on how many eligible songwriters take advantage of the deal.

The total pay-out is significantly less than that committed to by Spotify when it settled its class action. Technically, under US copyright law, damages in infringement cases are often set at a rate per infringement rather than being based on actual monies lost or gained as a result of the infringement, so the size and success of the streaming service is technically irrelevant. Though, of course, a service’s ability to pay has to be taken into consideration.

As well the cash element of the deal, Rhapsody has also agreed to set up an artist advisory board with an annual budget of at least $30,000 to try and keep artists and songwriters sweet moving forward.