Spotify, the most successful music steaming business with, over 60m paying subscribers and reportedly valued at $19bn has been sued by Wixen, a Californian music publishing company that collects royalties on behalf of artists including Tom Petty, Neil Young, Janis Joplin and Doors for $1.6bn, for allegedly hosting songs without full rights.
The suit states that, in accordance to the US Copyright Act, each song has two copyright claims: one to the recording and other to the composition. Wixen claims that Spotify “took a Shortcut” in cutting deals with major labels to host their back catalogues and didn’t obtain the composition rights in their deals and is seeking damages of $150,000 per song, for over 10,000 songs.
The news comes at an unpleasant moment for the music steaming service as it is reportedly preparing for a stock market sale which is expected to be live on the stock market later this year. According to Axios, a news website, Spotify has filed documents for an initial public offering (IPO) in December and will reportedly go public under a direct listing-which will save banking expenses and allow the company to sell stocks without the usual investor Road Show.
If Spotify lists on New York Stock Exchange, as expected, it would be the first to do so with direct listing and NYSE has recently changed its rules to accommodate such sales with the aim that a successful listing would encourage others to follow. However, Spotify declined to comment on the matter.
Spotify has faced similar claims in the past. Previously, Victory Records claimed it was missing out on its composition royalties as a result of which, Spotify launched a “publishing administration system” in order to fully recompense the royalty holders, nevertheless has faced lawsuits since.
Spotify paid over 20m in outstanding loyalties to number of publishers via the National Music Publishers’ Association in 2016. It settled a lawsuit with three small publishers, including the estate of Jaco Pastorius for over $43m in 2017 and has two outstanding lawsuits from publishers including Bob Gaudio of Group Frankie Valli and Four Seasons from July 2017.