By Chris Cooke | Published on Friday 3 July 2020
After Spotify recently pulled Kobalt into its ongoing legal battle with Eight Mile Style, the Eminem publishing company has hit back by pulling the Harry Fox Agency into the big bust up too.
Spotify previously demanded to know why Eight Mile Style had been banking royalty cheques it was sent via Kobalt if it believed that the streaming firm hadn’t actually got a licence to stream Eminem’s songs. Well, because of HFA’s dodgy dealings regarding the paperwork, Eight Mile Style has now shouted back.
Eight Mile Style sued Spotify last year claiming that the digital firm had been streaming a whole load of Eminem songs in the US without ever securing licences to cover the mechanical copying element of the stream. That mechanical copying is actually covered by a compulsory licence in the US, but for that to apply the streaming service must send paperwork and payment to the copyright owner. Most streaming services hire administrators to do that work and Spotify uses HFA.
It’s no secret that there have been lots of issues with that admin process since streaming took off in the US. With no central database telling you what songs are contained within what recording, or who controls each song copyright, streaming services and their administration partners have struggled to identify everyone who needs to be paid. Which means lots of people haven’t been paid, resulting in mega-bucks lawsuits.
The 2018 Music Modernization Act is aiming to fix all that by launching a mechanical rights collecting society in the US for the first. That means – like in most other countries – where a streaming service doesn’t know who to pay for the song rights in any one track, it can rely on a mop-up licence from the local society. Meaning it just hands over the data and money to that society, which takes responsibility for getting people paid.
Technically the MMA should have stopped lawsuits over past unpaid mechanical royalties, but that hasn’t stopped Eight Mile Style going legal. Supporters of the publisher point out that – while it may be true that the past system for paying mechanical royalties due on streams in the US wasn’t great, meaning services too frequently didn’t know who to pay – you’d think that even the slackest streaming service and most incompetent rights admin agency could work out that, whenever Eminem’s ‘Lose Yourself’ gets streamed, the publisher famously linked to the rapper needs to be paid.
That is why Spotify has pulled Kobalt into the legal battle. In its recent legal filing, the streaming firm argued that it had an administration relationship and then, subsequently, a direct licensing deal with Kobalt in the US. And in the same way that Eight Mile Style is famously Eminem’s publisher, Kobalt is famously Eight Mile Style’s administration partner. Well, maybe not “famously”. But both Kobalt and Eight Mile Style have publicly discussed their alliance in the past.
Both Kobalt and Eight Mile Style counter that – although Kobalt does administrate Eight Mile Style’s rights, and Kobalt has long had an administration relationship and then a direct licensing deal with Spotify – that doesn’t mean Spotify was licensed to stream Eminem’s songs. Kobalt said that the streaming firm’s recent legal filing “mischaracterises the substance” of its deals with both Eight Mile Style and Spotify.
However, as Spotify’s lawsuit points out, Eight Mile Style nevertheless “received royalty payments and observed billions of streams” via Kobalt and “it never once questioned Spotify’s authority to make music embodying those compositions available on Spotify’s service”.
But that was because of a load of dodgy dealing by Spotify and HFA when it came to the administration of the mechanical rights in Eminem’s songs, Eight Mile Style now says in its latest legal filing. The two companies, it alleges, concocted a “scheme to conceal and materially enable Spotify’s copyright infringement by circulating knowingly fraudulent documents”.
That included: “Untimely and otherwise ineffective ‘notices of intention’ to obtain compulsory mechanical licences, that were intentionally and knowingly backdated to appear as though they were issued on a timely basis, and the fraudulent rendering of purported ‘royalty’ statements with knowingly false representations to Kobalt Music Services America Inc”.
This scheme, Eight Mile Style goes on, was designed to “conceal Spotify’s failure to acquire timely compulsory mechanical licences for the Eight Mile compositions” and to “deceive Kobalt and Eight Mile into accepting ‘royalties’ that were based on statutory rates established for timely and valid compulsory licences; rates that were much lower than the amounts that Eight Mile could have otherwise negotiated because of Spotify’s failure to timely and properly obtain compulsory licences”.
Not only that, but the scheme aimed to “deceive Kobalt and Eight Mile into accepting ‘royalties’ that were based on false usage information, and avoid the need for Spotify to negotiate and contract with Eight Mile for the more expensive direct voluntary mechanical licensing agreement while still reproducing and distributing the iconic Eight Mile compositions”.
And the ruse worked, Eight Mile claims. “Kobalt, serving as the entity authorised to collect royalties from licences validly made for the Eight Mile compositions, was tricked into believing that Spotify had compulsory licences and into accepting ‘royalty statements’ distributed by HFA on behalf of Spotify. Kobalt was further tricked into believing that Eight Mile was being accounted to properly”.
The new legal filing also discusses how HFA sent some of the mechanical rights paperwork related to Eminem’s songs, including for the aforementioned ‘Lose Yourself’, to the US Copyright Office, which is what you are meant to do when you don’t who owns a copyright. But Spotify and HFA did know who owned the copyright in ‘Lose Yourself’, Eight Mile Style says.
The lawsuit goes on: “Despite ‘Lose Yourself’ having … been matched to its sound recordings on Spotify, Spotify simply did not bother to get a licence, committed wilful copyright infringement, and, with HFA’s willing and material participation and contributions, colluded with HFA to perpetuate the lie about licensing in royalty calculations while also not paying for the vast majority of the billions of unlicensed streams of one of the most well-known songs in history”.
It remains to be seen how this latter day mechanical royalties dispute plays out. But – especially now that Kobalt and HFA have both been pulled into the squabble – if it does get to court it will put the spotlight on just how chaotic the licensing of mechanical rights by digital services in the US has been to date.
Eight Mile Style will insist that corruption was at play, of course. And the other side will presumably have to counter, “no, that’s just how fucking fucked up this whole system has been to date – yeah, honest, it really has been that big a shit show”.
Legally speaking that doesn’t necessarily stop Spotify from being liable for copyright infringement (the MMA is more likely to save the streaming service from liability). But it will demonstrate how bad things were – which was as much the fault of the music publishing sector as the streaming services – and why the MMA and the new collecting society it has created are so important.
Assuming that society actually works, of course. There is still the risk that the MMA will do lots to reduce the liabilities of streaming services, but less to reduce the chaos of royalty processing. But, with $62 million of streaming service cash to spend, let’s just hope the new society overcomes the chaos too.