Do you know that more than 100,000 songs are streamed every second on Spotify? I know impressive right? It’s beyond an app, it’s turned into culture that has defined the consumption of music today so where did this all begin? Spotify was born in 2006 in the vibrant city of Stockholm, Sweden. The idea was of Daniel Ek and Martin Lorentzon,1 two visionaries who aimed to resolve one big challenge of the digital age: music piracy. Their mission? To make music accessible, globally, legally and affordably.
Fast forward to today, and Spotify is the undisputed king of music streaming with a whopping 640 million active users worldwide2. That’s more than the combined population of the United States and Brazil! Of those, over 200 million are premium subscribers who get to enjoy their favourite tracks ad-free. Whether you are listening to curated playlists, discovering new artists, or listening to podcasts, Spotify has become the one place for all.
LICENSING AND ROYALITY:
When you press play on your favourite track, Spotify ensures that the artist behind it gets paid for it. How? Through licensing agreements with record labels, publishers, and artists. Basically, Spotify pays a fee to legally stream music, which is then distributed to the creators as royalties.
So, what are royalties? They are paychecks that artists receive every time their music is streamed. These payouts depends on various other factors:
- Country: Spotify’s revenue (and artist payout) depends on where the listener is streaming. For example, streams from the US or UK might pay more than streams from smaller markets. The stronger the currency a country has, the more in revenue a typical stream will tend to generate compared to the weaker currency countries.
Subscription Type Streams from premium customers generate far more royalties per occurrence than streams that are free-to-access.
Spotify also uses sophisticated algorithms to track every single play. This ensures royalties are calculated accurately. These algorithms monitor:
- Number of Streams: Every time you replay that catchy song, it’s added.
- Length of Play: Do you listen to the entire track or just the first 10 seconds? That matters.
- Global Distribution: Algorithms adjust payouts based on where the music is streamed and the region’s subscription revenue.
Once all the numbers are crunched, Spotify divides up its revenue pie and distributes royalties to rights holders- labels, publishers, and, ultimately, artists.
WIXEN LAWSUIT
This was the case with Spotify when Wixen Music Publishing knocked on its legal door. In 2017, Wixen, on behalf of notable artists such as Tom Petty, Neil Young, and The Doors, filed a $1.6 billion lawsuit against Spotify. Their argument? That Spotify was streaming songs without first acquiring proper mechanical licenses—a vital requirement under copyright law.
Mechanical royalty is what the creator needs to receive in case their song is reproduced or distributed, even digitally. In Wixen’s case against Spotify, it was argued that the latter was not obtaining these licenses and wasn’t compensating songwriters fairly.
How did the case go with Spotify? To address this, Spotify reached a settlement with Wixen in 2019. Although the terms were confidential, it marked a turning point for how streaming platforms handle mechanical royalties.3
Mechanical Licensing Collective (MLC) The lawsuit highlighted the necessity of a more efficient system of tracking and payment of royalties. This is the reason why, in 2018, the Mechanical Licensing Collective (MLC) was born under the umbrella of the Music Modernization Act (MMA).4
- Royalty Accumulation: The streaming services like Spotify pay the MLC a percentage of their revenue that is then pooled as mechanical royalties.
- Database Accuracy: The MLC keeps a centralized database of copyright ownership claims, so songwriters and publishers get the royalties they are owed.
- Royalty Allocation: With this database, the MLC distributes mechanical royalties to copyright holders based on how many times their songs are streamed.
This system removes much guesswork, resulting in fewer lawsuits and ensures adequate compensation for the creators. As Spotify now partners with the MLC, managing mechanical licenses will become much less complicated and more effective for the artists and for the platform against future disputes.5
SPOTIFY’S COPYRIGHT POLICIES
- Signature of the Copyright Owner:
When a person is making a complaint, the copyright owner demands a physical or electronic signature in order to show that the complaint is genuine and made by the right person on behalf of the copyrighted work. - Information About the Copyrighted Work:
To avoid misidentification or accidental takedown, Spotify asks for all the details of the copyrighted material. These are: - Name of the work
Name of the artist or creator
URL for infringed content
This information enables Spotify to locate and subsequently act on the infringement allegation. - Good Faith Declaration
A declaration by the party lodging the complaint claiming that in good faith, the use of the work was not by authorization from the copyright owner, his agent or by virtue of law. This statement ensures accountability of complaints to avoid frivolous cases. - Ownership Documentation
Spotify demands proof of ownership or authorization to act on behalf of the copyright holder. This may be in the form of contracts, agreements, or registration details to ensure that the person filing the complaint has valid claims to the work. - Clearly defined process for counterclaims
For those who believe their use falls under fair use or that the claim was made in error, Spotify provides a mechanism to file a counter-notification. This ensures that both parties are heard before further action is taken.6
LAWS AND REGULATIONS
- Section 23: Licensing as a Shield
This section grants the right to platforms to obtain licenses on copyrighted works. Proper licenses can be obtained from copyright holders or organizations such as music labels; therefore, Spotify can stream music legally.
Licensing agreements form a protective umbrella that ensures platforms are licensed to use content without infringing on copyrights.
Under these licenses, Spotify pays royalties to artists, which further cements their legal position. - Section 12: Assignments of Copyright
Section 12 gives the copyright holder the right to transfer their rights to another person or entity fully or partially.
The music label or the individual artist may transfer his streaming rights to Spotify.
Thus, Spotify gets a legal authority to distribute the music, avoiding any infringement liability. - Section 16: Copyright protection is exclusive in nature.
This makes it establish the point that no one can claim or enforce any rights in a work unless such rights are specifically recognized under the Copyright Act. - Section 52(d): Fair Use and Statutory Exceptions
Section 52(d) deals with statutory exceptions to copyright infringement, including use for research, education, criticism, or review.
Although Spotify is licensed, its users who create playlists or share snippets for personal use may fall within the purview of fair use.
Adherence to these exceptions ensures that Spotify does not allow illegal use of copyrighted material.7
WHY COMPLIANCE MATTERS?
By complying with these provisions, Spotify ensures that it is just like other domestic copyright regimes in India, making the platform perfectly legal for streaming music.
Prevents legal disputes: Compliances see that copyright rights are respected; thus, lawsuits are reduced.
Fosters trust: Artists, labels, and users trust the law-abiding platforms.
Tames innovation: Legal protection for Spotify allows the company to focus on improving the user experience rather than worrying about laws all the time.
Footnotes
1. Wikipedia, Spotify, https://en.wikipedia.org/wiki/Spotify (last visited Jan. 26, 2025).
2. DemandSage, Spotify Stats: Users, Revenue, and Growth in 2025, https://www.demandsage.com/spotify-stats/ (last visited Jan. 26, 2025).
3. The Verge, Spotify Settles $1.6 Billion Wixen Lawsuit Over Music Publishing Royalties, https://www.theverge.com/2018/12/20/18150197/spotify-wixen-lawsuit-settlement-dismissal-music-publishing (Dec. 20, 2018).
4. U.S. Copyright Office, Music Modernization Act Frequently Asked Questions, https://www.copyright.gov/music-modernization/faq.html#:~:text=The%20Music%20Modernization%20Act%20updates,addresses%20distribution%20of%20producer%20royalties (last visited Jan. 26, 2025).
5. Deliver My Tune Blog, MLC Roles and Responsibilities, https://blog.delivermytune.com/mlc-roles-and-responsibilities/#:~:text=The%20MLC%20oversees%20blanket%
20mechanical,to%20use%20musical%20works%20legally.&text=One%20of%20the%20vital%20MLC,on%20behalf%20of%20rights%20holders (last visited Jan. 26, 2025).
6. Spotify, Spotify Terms and Conditions of Use, https://www.spotify.com/in-en/legal/end-user-agreement/ (last visited Jan. 26, 2025).
7. India Code, The Copyright Act, 1957, https://www.indiacode.nic.in/handle/123456789/1367 (last visited Jan. 26, 2025).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
https://www.mondaq.com/india/copyright/1594428/spotify-and-copyright
