Does Spotify Owe You Money? Streaming Service Sued for $150 Million in Unpaid Royalties

February 24, 2016
Post by Brandon W. Clark

David Lowery, the frontman of Cracker and Camper Van Beethoven, has recently filed a class action lawsuit seeking at least $150 million dollars in damages against Spotify. Lowry alleges Spotify knowingly, willingly, and unlawfully reproduces and distributes copyrighted compositions without obtaining mechanical licenses.

According to the complaint, which was filed December 28th in the Central District Court of California, Spotify has unlawfully distributed copyrighted music compositions to more than 75 million users, but has failed to identify or locate the owners of those compositions for payment.

Before going further it is important to note that there are two copyrights in each sound recording. Typically, record labels own the copyright in the sound recording while music publishers own the copyright in the composition. Every label (major or indie), unsigned artist, or self-released artist must go through a distributor to get their music on Spotify. Spotify then pays royalties to the distributor for the sound recording but NOT the composition. Spotify has negotiated the sound recording royalty rates that they pay with the labels and artists (via the distributor) directly. On the publishing side, streaming services don't need permission to use a composition but they do need to obtain a license for it. That license, called a Mechanical License, can be obtained from the publisher directly or from the Harry Fox Agency (HFA).

Mechanical royalty rates for downloads and sales is set by the government and is currently 9.1 cents per sale. For streaming, however, the rates are much more complicated.  HFA has a number of helpful, although slightly confusing,charts to calculate the streaming mechanical royalty rate per service.

Lowery's suit alleges that Spotify has not only failed to pay all of the mechanical royalties, but also that they failed to obtain the proper licenses. This lawsuit will most likely have large ramifications as the battle between the music industry and the tech industry intensifies. Apple Music, and other streaming services, may likely encounter similar lawsuits in the future and since US copyright law hasn't caught up with technology this lawsuit may play a large role in shaping the future of the music industry as it relates to streaming services.

In response to the lawsuit, Spotify's global head of communications, Jonathan Prince stated, "We are committed to paying songwriters and publishers every penny. Unfortunately, especially in the United States, the data necessary to confirm the appropriate rightsholders is often missing, wrong, or incomplete.  When rightsholders are not immediately clear, we set aside the royalties we owe until we are able to confirm their identities.  We are working closely with the National Music Publishers Association to find the best way to correctly pay the royalties we have set aside and we are investing in the resources and technical expertise to build a comprehensive publishing administration system to solve this problem for good.‚¬

Lowery's complaint seeks restitution on Spotify's unlawful proceeds, including Spotify's gross profits, compensatory damages in an amount to be ascertained at trial, statutory damages for all penalties authorized by the Copyright Act, reasonable attorneys' fees, and pre-and post judgment interest of monetary awards.

Brandon W. Clark is the Chair of the Copyright And Entertainment Law Practice Group at McKee, Voorhees & Sease, PLC. For additional information please visit or contact Brandon directly via email at

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