It was an… eventful start to the week for Spotify and Warner Music Group.
WMG, unhappy with the level of payments Spotify was set to deliver from its service in India, refused to allow its publishing company, Warner/Chappell, to license Daniel Ek’s streaming service in the region.
Spotify, in response, tried to circumvent the need for a direct license from Warner/Chappell, applying for a statutory license in India which is more typically used by TV and radio broadcasters. Then the fun really began.
Warner sued Spotify by applying for an emergency injunction seeking to block the statutory license. Spotify then publicly accused Warner of “abusive behavior”, before announcing to media that WMG’s application for an injunction had been “denied” by the Bombay High Court.
Warner called Spotify a liar for doing so, adding that it viewed public comments from the streaming company regarding its negotiations as “appalling”. (Spotify has since retracted its use of “denied”, instead stating that Warner’s application for an injunction was “not granted”.)
So that was Monday and Tuesday.
On Wednesday – and it was easy to almost forget this bit amid all the hoo-ha – Spotify launched in India. It didn’t have a statutory license, but Warner didn’t block it, either.
Spotify has, essentially, been granted a four-week grace period whereby it can use Warner/Chappell’s music at its own risk, but may still retrospectively face legal action for doing so. (Twist in the tale: some have suggested to MBW that copyright infringement cases in India rarely end in statutory damages being paid. In other words, even if Spotify is found guilty of using copyrights illegally, it would probably only ever have to pay for the usage plus Warner’s legal fees… and that’s it.)
This acrimonious saga has raised some interesting questions. Not least: if Spotify believes it doesn’t need to negotiate a license for Warner/Chappell’s rights in India, and can instead rely on a statutory license, why would it bother negotiating with any rights-holders next time around? (For launch, Spotify has inked licensing deals for India with both Universal and Sony’s recorded music and publishing companies.)
Could a successful statutory license application by Spotify for Warner/Chappell’s rights mean the end for free market music negotiations in India, full stop? Clearly, that’s a question that’s been playing on senior minds in the music business this week.
“We want to see a thriving and competitive music industry in India for artists and fans. An incorrect interpretation of the statutory license would jeopardize that goal and set a dangerous precedent.”
Mitch Glazier, RIAA
When MBW asked Mitch Glazier, CEO and Chairman of US trade body the RIAA, about it today (February 28), he said: “We want to see a thriving and competitive music industry in India for artists and fans. An incorrect interpretation of the statutory license would jeopardize that goal and set a dangerous precedent.”
Last week, MBW suggested that “cracks” were beginning to show in Spotify’s relationships with the world’s biggest rightsholders. This week, those cracks have became fault lines.
Further question: did the very public strain shown between Spotify and one of its biggest suppliers of content this week worry Wall Street?
Spotify’s share price on the New York Stock Exchange opened on Monday morning at $152.00, giving it a public market cap of circa $27.5bn.
Yet as this article is published, at the bell on the NYSE today (February 28), that same share price has dropped nearly 8% to $140.14.
Spotify’s market cap, meanwhile, sits at $25.35bn, down by around $2bn on its opening value this week.
The plan, surely, was for Spotify’s launch in India to be rapturously received by investors and analysts, and for that to be reflected in a soaring share price.
So far, at least, the opposite has happened.
Was the company’s spat with Warner the fly in the ointment?Music Business Worldwide