Get the latest market trends in your inbox

Stay on top of the latest market trends and economic insights with the Axios Markets newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Sam Jayne / Axios

On Tuesday, news broke that Wixen Music Publishing is suing Spotify for $1.6 billion for failing to obtain proper royalty licensing. The complaint centers around "mechanical" royalties, an on-going debate in music streaming.

Why it matters: Spotify (and others in the digital streaming industry) has long been criticized for not paying record labels and artists their fair share of the profits. But licensing rules may be due for some updating as online streaming continues to grow in popularity over physical records and musical downloads. Spotify is also in the midst of preparing to go public, as Axios reported.

What are mechanical rights?

  • This refers to the copyright of a song's composition, typically owned by the songwriter or a music publisher. The other type of music copyright is for a song's sound recording, usually owned by the record label.
  • This is also how the copyrighter controls the reproduction of the song: every time a record company makes a CD, tape, or other record of the song, it has to pay this royalty.
  • Anyone can obtain what's called a "compulsory license" without permission to pay out mechanical royalties. This means a person or company can send the copyrights holder a notice of intent, go ahead and play the song and start sending royalty checks without negotiating a deal ahead of time. The first compulsory license was created by Congress in 1909 after the emergence of the player piano to make it easier to play songs. Since then it's been extended to any format of mechanical recording including CDs, tapes, etc.

So what happened?

  • Spotify has been inking licensing deals with the record labels and outsourcing the job of managing mechanical rights licenses to the Harry Fox Agency.
  • However, there have been disputes over whether HFA and Spotify have properly accounted for all royalties the music streaming company owes, which has resulted in several lawsuits over the last few years. In its lawsuit, Wixen claims that Spotify shouldn't have left the whole responsibility to HFA, and is responsible for the gaps in licensing.
  • In May, Spotify proposed a settlement in a similar lawsuit for $43 million, although Wixen says that it's not enough to adequately compensate its songwriters.

What's next: In December, a bill was introduced in the House aimed at simplifying licensing for digital music and increasing royalty payments to rights holders. The bill includes a provision to create a new entity that will handle mechanical rights, collecting royalties from streaming services like Spotify, and paying them out to rights holders, though companies are free to strike their own deals. Those who use the agency will be protected from liability for statutory damages.

Go deeper

37 mins ago - Health

CDC: It's time for "universal face mask use"

Photo: Paul Hennessy/SOPA Images/LightRocket via Getty

The CDC is urging “universal face mask use” for the first time since the coronavirus pandemic began, citing recent case spikes as the U.S. has entered a phase of “high-level transmission” before winter officially begins.

Why it matters: Daily COVID-related deaths across the U.S. hit a new record on Wednesday. Face coverings have been shown to increase protection of the wearer and those around them, despite some Americans' reluctance to use them.

2 hours ago - World

Saudi Arabia and Qatar near deal to end standoff, sources say

Qatar's prime minister (R) attends the 2019 Gulf Cooperation Council summit in Saudi Arabia. Photo: Fayez Nureldine/AFP via Getty

Saudi Arabia and Qatar are close to a deal to end the diplomatic crisis in the Gulf following U.S.-mediated reconciliation talks this week, sources familiar with the talks tell me.

Why it matters: Restoring relations between Saudi Arabia and Qatar would bring a sense of stability back to the Gulf after a 3.5 year standoff. It could also notch a last-minute achievement for the Trump administration before Jan. 20.

House passes bill to decriminalize marijuana

Rep. Earl Blumenauer (D-Ore.), a longtime marijuana legalization advocate and co-sponsor of the bill. Photo: Pete Marovich For The Washington Post via Getty Images

The House on Friday voted 228-164 in favor of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, marking the first time a congressional chamber has voted in favor of decriminalizing marijuana at the federal level.

Why it matters: The Washington Post describes the bill as a "landmark retreat in the nation’s decades-long war on drugs," which has disproportionately affected people of color.