Spotify has settled the $1.6 billion lawsuit filed by music publisher Wixen Music Publishing in December 2017. The publisher, which represented artists like Tom Petty, Missy Elliot, Stevie Nicks and Neil Young, alleged copyright infringement – saying that Spotify was using tens of thousands of songs without a proper license.
The financial terms of the settlement were not disclosed, but Spotify has not filed a disclosure to shareholders with the SEC – an indication that the $1.6 billion was not awarded.
Instead, Spotify and Wixen have put out a joint statement saying they’ve agreed to a final dismissal of the lawsuit.
“The conclusion of that litigation is a part of a broader business partnership between the parties, which fairly and reasonably resolves the legal claims asserted by Wixen Music Publishing relating to past licensing of Wixen’s catalog and establishes a mutually-advantageous relationship for the future,” the statement reads.
There is a financial component to the settlement, but it’s clearly not the $1.6 billion Wixen had originally demanded, or Spotify would have needed to disclose that number to shareholders through a filing. However, we do understand the entirety of the funds from the settlement are going towards back royalty payments, while the rest of the agreement involves how royalties will be paid going forward.
Though Spotify has faced a number of lawsuits from rights holders over the years, including one it settled for $43 million back in 2017, the Wixen suit was focused on Spotify’s use of the artists’ tens of thousands of songs without proper compensation.
The complaint had alleged that “Spotify brazenly disregards United States Copyright law and has committed willful, ongoing copyright infringement,” it said.
Wixen had also claimed that Spotify “neither obtained a direct or compulsory mechanical license” for the use of its artists’ works. And it claimed that, of the then 30 million songs in Spotify’s catalog, Spotify failed to pay songwriter royalties to a publishing company approximately 21% of the time.
Below, the original complaint:
Today, the two parties announced they’ve settled on the matter out of court.
Spotify and Wixen had been working on an agreement for some time.
According to a filing from October 16, 2018, a judge had granted the parties an extension to respond to the complaint and submit their joint discovery plan because of their “ongoing settlement discussions.” They had until December 21, 2018 to answer or respond to the complaint, the filing said, but would not be granted any further continuances.
“I want to thank Daniel Ek and Horacio Gutierrez, and the whole Spotify team, for working with the Wixen team, our attorneys and our clients to understand our issues, and for collaborating with us on a win-win resolution,” said Randall Wixen, president of Wixen Music Publishing, Inc., in a statement. “Spotify is a huge part of the future of music, and we look forward to bringing more great music from our clients to the public on terms that compensate songwriters and publishers as important partners. I am truly glad that we were able to come to a resolution without litigating the matter. Spotify listened to our concerns, collaborated with us to resolve them and demonstrated throughout that Spotify is a true partner to the songwriting community,” he said.
“We’d like to thank Randall Wixen and Wixen Music Publishing for their cooperation in helping us reach a solution,” said Horacio Gutierrez, Spotify General Counsel and VP, Business & Legal Affairs, in a statement. “Wixen represents some of the world’s greatest talents and most treasured creators, and this settlement represents its commitment to providing first-rate service and support to songwriters while broadening its relationship with Spotify.”
Spotify has been working to better address the claims by rightholders as well as their needs, from a product perspective, in more recent months. Following its 2017 settlement agreement in another suit the company was directed improve the “gathering and collecting of information about composition owners to help ensure those owners are paid their royalties in the future.”
Earlier this year, it followed up on that by launching a new songwriter credits feature, which helps to better track who deserves credit for the song. In November, it launched an analytics service for music publishers to track their artists’ streaming stats.
It also this year snatched up music licensing platform Loudr to help it be better prepared for the technical challenges that come with tracking rights, and specifically the mechanical licenses, which have been the issue in numerous legal claims.
The overall music industry has also impacted since the suit was filed by the Music Modernization Act, which was signed into law in October. The law overhauls the regulations for licensing in the streaming era. However, it says that royalty disputes originating after Jan 1, 2018 would be handled under the new law, so it would not have applied to the Wixen suit.