Spotify Yanks Victory Records Catalog From Streaming Music Service In Royalties Dispute

Two days after a prominent metal and hard rock label claimed it wasn’t getting paid money it was owed from Spotify, the streaming service yanked the label’s entire catalog down, leaving fans scratching their heads and the label’s brass asking for answers.

Victory Records, the Chicago label that’s home to popular rock and emo bands including Hawthorne Heights, Taking Back Sunday and A Day to Remember, said it has not received the publishing royalties it’s owed on more than 53 million streams of some 3,000 songs by Victory artists. In response, Spotify pulled Victory’s entire catalog off its service, as well as a number of albums that had nothing to do with the dispute, then sent the label a letter asking it to enter into an agreement that would have made it harder for them to audit the payments they received in the future.

“It makes them look like schoolyard bullies,” Victory founder Tony Brummel told International Business Times. “I begged them to leave the music up.”

“Why isn't anybody from Spotify calling me and saying, ‘We screwed up. We're sorry’?"

While Brummel has said he remains optimistic about his future relations with Spotify -- “We only want to be a great partner,” Brummel said -- the tense state of affairs underscores a persistent, frustrating problem facing the industry.

Spotify did not respond to requests for comment.

An Infrastructure Problem

At issue is an unpaid amount of mechanical publishing royalties, a form of payment owed to songwriters every time a particular recording is copied, then played on a service like Spotify. When songs are played on an on-demand streaming music service, there are a number of parties that get paid for different reasons. Songwriters in particular are paid two separate royalties: a mechanical royalty, which historically was paid every time a copy of a recording was made, and a performance royalty, paid every time a song is performed or played somewhere.

The collection of performance royalties is handled by performance rights organizations like ASCAP and BMI, which have invested considerably to build up the infrastructure needed to account for and collect monies owed for enormous numbers of performances. But the collection of mechanical royalties at digital services like Spotify has historically been handled by Harry Fox Agency. Under HFA’s watch, mechanical songwriting royalties for digital services like Spotify and YouTube have not always made their way to the appropriate parties.

According to Audiam, a company that helps songwriters and publishers including Victory Records claim royalties from digital streaming services like Spotify and YouTube, as much as 30 percent of the mechanical songwriting royalties owed to songwriters do not get to them. Audiam’s CEO, Jeff Price, says this amounts to more than $100 million not paid to the people owed, though Spotify is far from the only company failing to pay songwriters and publishers the amounts they’re due.

“It's not just Spotify,” Brummel said. “It's all of them.”

A Hasty Move

According to Brummel and Victory Records counsel, Victory had made Spotify aware months ago that it had not been paid mechanical royalties it felt it was owed. But the publication of a Wall Street Journal article, which made very public the idea that Spotify was violating copyrights for failing to pay those royalties, caused Spotify to pull down the Victory Records catalog late Monday night.

They acted quickly because the penalties for knowingly violating copyright are severe; a single copyright violation carries a maximum penalty of $150,000 per song, and with more than 3,000 songs apparently in play, Spotify may have decided to minimize its exposure.

“We felt we had no choice but to temporarily take down their content until we can come to a resolution,” Spotify spokesman Jonathan Prince wrote in an email to the Wall Street Journal.

According to Victory, Spotify then sent Victory a contract that would have granted Spotify a license for mechanical royalties, a contract that Brummel cannot sign; it already employs Audiam for that very purpose.

How and when this dispute will be resolved remains unclear. Sources close to Victory have said that they've reached out to Spotify in an attempt to figure out a resolution. But in the meantime, the immediate upshot for Victory fans in the United States is crystal clear.