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Spotify agrees to $43.45 million fund to settle copyright suits

Swedish music streaming leader Spotify has agreed to set up a $43.45 million fund to settle a potentially costly pair of US copyright lawsuits from artists, lawyers said.

Spotify agrees to $43.45 million fund to settle copyright suits
File photo of the Spotify app. Photo: Christine Olsson/TT

The move marks the latest effort by the Swedish company to turn the page on messy disputes as it considers a public listing amid the soaring growth of streaming.

The settlement would end lawsuits spearheaded by two indie songwriters who double as academics — folk rock singer Melissa Ferrick and David Lowery, frontman of alternative rock bands Cracker and Camper Van Beethoven.

The two had pursued class-action cases — meaning a mass of musicians could claim payouts — with Ferrick seeking $200 million and Lowery asking for $150 million.

The artists had accused Spotify, which boasts of offering instant access to 30 million songs, of recklessly putting music online without securing mechanical rights — the permission to reproduce copyrighted material — from the tracks' composers.

Spotify and other streaming services pay royalties both to performers and songwriters — who are often lesser known and, for older and more obscure songs, more difficult to identify.

Under the settlement filing that needs to be approved by a federal judge in New York, Spotify would set up the $43.45 million fund to compensate songwriters for lack of licensing.

Spotify would also pay for streams of the tracks afterward — which the filing said would “easily total tens of millions of dollars in future royalties.”

READ ALSO: Spotify expands with US headquarters move

Steven Sklaver, a Los Angeles-based lawyer who co-led the case, called the settlement especially significant as Spotify had already reached a deal last year with the National Music Publishers' Association.

The association, which represents songwriters under major US publishers and was not involved in the class-action suit, secured around $21 million from Spotify.

Sklaver, a partner with the firm Susman Godfrey, estimated that hundreds of thousands of songwriters would qualify as part of the class seeking payment from Spotify.

But the national association has said that more than 96 percent of music publishers accepted last year's deal. They are ineligible for the latest settlement — meaning much bigger payouts for indie artists such as Lowery and Ferrick who held out.

Under the settlement, Spotify would work with other industry players including record labels to digitize copyright records for musical works before 1978, when US law in its current form took effect.

Spotify would also support the creation of an outside body to help identify unmatched tracks and set up an auditing system so songwriters can verify the accuracy of royalty payments.

Spotify did not respond to a request for comment on the settlement.

The company, which as a private company does not need to disclose financial figures, was estimated to be worth more than $8 billion in 2015 when it secured investors' financing.

That figure is likely to have risen sharply with the rapid growth of streaming and Spotify, which said in March that it had more than 50 million paying subscribers.

READ ALSO: Spotify planning on going public, but not the traditional way

Spotify has long mulled going public, likely by listing on the New York Stock Exchange. Last week the company again raised expectations by naming four new members to its board, three of them with experience in the entertainment industry.

Fueled by streaming, the global music industry has posted two straight years of solid growth, the first substantial expansion since the start of the internet age two decades ago.

But Spotify and other streaming services have frequently been hit by complaints by artists who say that they are insufficiently paid — although the number of musicians who boycott streaming has dwindled to a trickle.

SPORT

Is football next for Spotify’s billionaire CEO? 

The owner of Spotify, Daniel Ek, has offered to buy Premier League club Arsenal amid supporter backlash against their unpopular American owner, Stan Kroenke.

Arsenal play to an empty stadium
Spotify's owner has set his sights on Arsenal. Photo: Adrian Dennis/AFP

Spotify’s billionaire CEO, Daniel Ek, who revolutionised on-demand music listening for millions of people now hopes to bring his business acumen to “the beautiful game”.

The 38-year-old, known for his no-nonsense attitude, has offered to buy Premier League club Arsenal amid supporter backlash against unpopular American owner Stan Kroenke.

Ek co-founded Spotify with Martin Lorentzon in 2006, and the company which made its debut on the New York Stock Exchange in 2018 now has a market capitalisation of $56 billion.

The Swedish billionaire 

Bald, bearded and usually seen in sneakers, T-shirt and a blazer, Ek is known for his reserved style and pragmatism. He’s a shy problem-solver with a creative streak who takes long walks to think things through and prizes collective teamwork over the individual.

Ek got into computer programming as a young child, and was a dollar millionaire by the age of 23 when he sold his online advertising company, Advertigo, in 2006 for a reported $1.25 million.

“But he’s more of a businessman than a tech nerd,” Sven Carlsson, co-author of “The Spotify Play”, told AFP, painting him as a visionary.

“He’s always thinking six months ahead. He’s not into the details. He’s known for having ambitious, lofty goals, with no understanding for how unrealistic they are,” he said.

“He thinks big, and he has patience” to see those projects through to fruition.

Ek was raised in Stockholm’s working-class suburb of Rågsved. His father left the family when Daniel was young.

“He’s always had something to prove… Being left by his dad was a formative experience,” Carlsson said.

Pelle Snickars, co-author of “The Swedish Unicorn: the Story About Spotify”, describes Ek as “quite Swedish in terms of values”.

“We don’t see him on magazine covers alongside celebrities, he’s not hierarchical and does not hesitate to showcase his collaborators,” Snickars told AFP.

With around 9 percent of Spotify’s capital and 37 percent of voting rights, Forbes put Ek’s fortune at an estimated $4.8 billion in April 2021.

“Innovations are never entirely new”

In 2006, Ek and Lorentzon came up with the idea of creating a platform to distribute music online legally, a practice that was dominated by illegal file sharing sites at the time.

The duo experimented with sharing MP3 music files between the hard drives on their computers. In October 2008 Spotify was finally ready to go live after Ek pleaded with music labels to open their catalogues.

“Innovations are never entirely new,” Ek told the Royal Institute of Technology (KTH) in Stockholm during a 2013 visit.

“The success comes from combining things that already exist and trying to solve a problem that one is really involved in,” he added.

Ek reportedly dropped out of the university’s engineering programme to pursue an IT career – though his enrolment at the school has never been proven, Carlsson noted.

He said Ek’s former colleagues nicknamed him “Spice.”

“They thought he always spiced up his stories a little to make them more interesting,” Carlsson said, adding that it wasn’t necessarily a bad thing.

“Storytelling is something Spotify and Daniel Ek have always been good at.”

Football next? 

Ek’s perseverance may have led to the remarkable rise of the start-up, but artists have over the years complained of it paying them too little and cannibalising sales from their albums.

Ek has repeatedly argued that streaming is a better alternative for artists and that “piracy doesn’t pay (them) a penny – nothing, zilch, zero.”

Snickars and co-author Rasmus Fleischer dispute the idea that Spotify was founded to end piracy and force consumers to pay for music.

They claim that neither Ek nor Lorentzon “had any experience with working professionally with music”, but they had a common background from digital advertising.

“They weren’t particularly interested in music…they could have worked on skin products instead,” Snickars told AFP.

Now, Ek is ready to dive into the football arena.

“As a kid growing up, I’ve cheered for Arsenal as long as I can remember. If KSE [Kroenke Sports Enterprises] would like to sell Arsenal I’d be happy to throw my hat in the ring,” Ek wrote on Twitter on April 23.

Kroenke has however insisted Arsenal is not for sale, despite growing supporter unrest at the American billionaire’s ownership of the club, whose last Premier League title came in 2003/04.

Article by AFP’s Pia Ohlin.

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