After settling with songwriters over mechanical rights, Spotify is now challenging the applicability of this copyright to its business in another lawsuit
Hold on tight: we're going to get down into the weeds a bit on a copyright issue. In early 2016, we wrote about the …
Context & Ripple Effects
Spotify's mechanical-rights problem began in late 2015, when it was sued over mechanical rights — the songwriter royalties owed when a musical work is reproduced — after reportedly failing to license compositions properly. In May 2017 it settled the class action with a $43.4M fund for unpaid royalties, a move that looked like closing the book on the issue.
Today's report shows the opposite: rather than accepting the settlement's implicit premise that mechanical rights govern streaming, Spotify is now litigating in a separate suit whether this copyright applies to its business at all. That is a direct challenge to the revenue basis of songwriters and publishers, and it lands just as publisher Wixen is preparing a far more aggressive $1.6B infringement claim alleging a large share of the catalog is unlicensed.
First-order effects
- Spotify's legal posture shifts from compensating songwriters to attacking the underlying right: the class settlement's $43.4M fund now coexists with a suit arguing mechanical rights may not cover streaming reproduction at all.
- Songwriters and music publishers face a direct threat to the legal foundation of their streaming royalties — if Spotify's applicability argument gains traction, the reproduction-royalty stream they rely on is up for renegotiation in court.
Second-order effects
- Publishers are unlikely to wait for the outcome: Wixen's suit, claiming up to 21% of Spotify's songs are unlicensed and seeking $1.6B+, models a harder-nosed response — targeted, large-damages actions by individual publishers rather than class settlements.
- A Spotify win would pressure the rest of the streaming industry to adopt the same applicability defense, forcing publishers and labels to defend mechanical rights case by case instead of licensing them by default.
Third-order effects
- If the pattern holds, US mechanical-licensing law — built for physical reproduction and, as coverage of the Wixen litigation notes, slow to respond to technological change — gets restructured around streaming through litigation rather than legislation.
- The broader endgame the coverage points toward is disintermediation: labels' later worry over services doing direct deals with artists (as in Warner Music's India suit against Spotify) suggests publishers who lose leverage over mechanicals will fight to stay in the value chain by other means.
The trend: Streaming services are moving from paying settlements over mechanical royalties to litigating whether those rights apply to streaming at all, forcing publishers toward larger, targeted suits and direct-licensing battles.