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Spotify pulls Victory Records catalogue in mechanical royalties dispute

By Chris Cooke | Published on Wednesday 21 October 2015

Recordings from US independent Victory Records have been pulled from Spotify in America over a dispute between the streaming service and the indie’s sister music publishing business Another Victory. The dispute is basically over unpaid mechanical royalties, though is really about the complexities in the way streaming services are licensed, and specifically the extra complexities US copyright law forces on the whole process.

Streaming services exploit both song and recording copyrights, we know that, but they also exploit both the ‘mechanical right’ and the ‘performing right’ elements of both those rights. See, it’s already complex and I’m only one sentence in. This is mainly an issue on the songs side, because in music publishing the mechanical rights and the performing rights are traditionally dealt with separately, and in some countries they are controlled by different entities.

But in the main, music publishers have tried to provide streaming services with licenses that cover both mechanical and performing rights. So in the UK, performing rights society PRS and mechanical rights society MCPS offer one joint licence. And where the big five publishers have licensed the mechanical rights they control directly, they have done so in partnership with the collecting societies that control the accompanying performing rights.

And then there is America, where performing rights are usually handled by collecting societies like BMI and ASCAP, but the mechanicals are handled by, well, who exactly? Mechanicals are covered by a compulsory license in the US, so streaming services don’t need to get specific permission from the publisher, but they do need to pay them royalties. Though, with no central database of song copyright ownership, that’s not quite as simple as it sounds. Both rights owners and digital services often use middle-men agencies to facilitate payments, but most people agree that the system is far from efficient.

Former Tunecore chief Jeff Price built a whole new business to try to help rights owners identify and chase the mechanical royalties they are due from streaming services, reckoning that there is an ever increasing pile of cash being lost to the inefficient system. And it’s that company, Audiam, which is working for Another Victory, and which reckons mechanicals have not been paid on about 53 million Spotify streams.

The dispute between Victory and Spotify over the unpaid mechanicals has been brewing for a while, but seemingly came to a head when the streaming service proposed a direct deal with the indie’s publishing business to cover mechanical payments in its songs catalogue. Victory said it was unable to sign this deal, not least because of its existing arrangement with Audiam.

According to the indie, it was then Spotify which decided to pull its tracks from the streaming service in the US, even though the dispute is over the company’s songs repertoire. While there is some crossover between Victory’s recordings and songs catalogues, there are recordings where song rights are controlled by other parties which are not subject to this particular mechanicals row. This, says Victory, proves that Spotify’s “internal systems are inadequate”.

On this week’s developments, Victory – which, as a label, has a history of being more vocal than most when ever it has a disagreement with another party – said: “We could not sign [the contract] for a variety of reasons, most importantly, that it would put us in direct violation of our agreement with Audiam. Spotify knows we are in business with Audiam and were essentially asking us to breach/ignore that agreement. The issue of non-payment for songwriters and composers is a widespread problem and not exclusive to Victory Records’ artists. We understand your frustration with not being able to listen to the music you enjoy”.

The label concluded that “the bottom line is that artists and songwriters are not being paid and fans of Victory’s artists cannot listen to the music. Thank you for your support and we remain hopeful that Spotify will do the right thing”.

There has been speculation in the last 24 hours as to whether Spotify’s decision to pull Victory’s content is because of concerns over the legal ramifications of still streaming this music while the dispute rumbles on, or whether the streaming firm is playing hardball in trying to force the indie into doing the deal.

Spotify’s US spokesman Jonathan Prince told the Wall Street Journal that neither Another Victory nor Audiam had sent over sufficient data to substantiate their claims of unpaid royalties, and that “given that we don’t have that information, we felt we had no choice but to temporarily take down their content until we can come to a resolution”.

A lot of the problems here come back to the lack of a decent database of copyright ownership – ie the thing the music publishing sector’s Global Repertoire Database project was trying to build before it collapsed last year. Such a database would make it easier for streaming services to identify who is owed what whenever a song is streamed, and to then make payments. It would also allow digital services to more accurately pull song catalogues where disputes occur, rather than having to pull the recordings catalogue that happens to be in common ownership instead.

Many in music publishing recognise this weakness, so are more diplomatic when discussing the unpaid mechanicals in the US streaming space, instead talking about all sides needing to collaborate to fix the problems. But since launching Audiam, Price has been less diplomatic, insisting that the streaming services are obliged under US copyright law to pay mechanical royalties, and it’s their responsibility to do whatever it takes to make that happen. And in outspoken Victory Records boss Tony Brummel, he likely has an ally on that point.

For more on the complexities of digital licensing, don’t forget to download the report we produced for the UK Music Managers Forum, ‘Dissecting The Digital Dollar’, it’s totally free and available here.

Elsewhere in Spotify news, TechCrunch reckons that a couple of recent hires at the firm might mean Japanese and Indonesian launches are on the horizon. Though the company remains non-committal on specific plans to launch in those two key Asian markets, except to confirm that it aspires to operate in most Asian countries.