Spotify sued for $1.6bn in unpaid royalties as it reportedly files for IPO
The music streaming service faces a claim on behalf of artists including Neil Young and Janis Joplin as it prepares a share sale
Music streaming service Spotify has been sued by a music publishing company for $1.6bn (1.18bn), for hosting songs it allegedly doesnt have the full rights to. The news comes at an awkward moment for the tech company, which is reportedly preparing for a stock market sale.
Wixen, a Californian company that collects royalties on behalf of artists including Tom Petty, Neil Young, Janis Joplin and the Doors, alleges that Spotify took a shortcut when it cut deals with major labels to host their back catalogues.
The suit states that under the US Copyright Act, each song has two copyright claims: one to the recording, and the other to the composition. Wixen claims that Spotify didnt obtain the composition rights in their deals, and is seeking damages of $150,000 per song, for over 10,000 songs.
The company is the most successful in the music streaming business, with over 60m paying subscribers. It is reportedly valued at $19bn, and is expected to be floated on the stock market later this year.
According to news website Axios Spotify has filed documents for an initial public offering (IPO) in December. Spotify will reportedly go public under a direct listings which allows a company to sell stock without the usual investor roadshow and saves on some banking expenses.
If the company lists on the New York Stock Exchange, as expected, it would be the first to do so with a direct listing. NYSE recently changed its rules to accommodate such sales and a successful listing would likely encourage others to follow. Spotify declined to comment on the story.
Nor has the company yet commented on the suit, but it has faced similar claims in the past. In 2015, the company launched a publishing administration system to more fully recompense royalty holders, after punk label Victory Records claimed it was missing out on composition royalties, but Spotify has nevertheless faced further lawsuits since. In 2016, it paid over $20m in outstanding royalties to a number of publishers via the National Music Publishers Association, while in May 2017, it settled a lawsuit with three small publishers, including the estate of Jaco Pastorius, for over $43m.
Spotify has two outstanding lawsuits filed against it in July 2017, from publishers including Bob Gaudio of the group Frankie Valli and the Four Seasons.