Last month a leaked contract agreement between Sony and Spotify confirmed many peoples' worries that the music streaming business has been catering towards music labels more so than artists. Now, a lawsuit from 19 Recordings, a record label with close ties to American Idol, has amended a lawsuit against Sony Music that addresses the complaints, according to Billboard.
Sony Music lays claim to more than a five-percent ownership stake in Spotify and 19 Recordings' lawsuit alleges that the label has used the equity position and negotiating power at the expense of their own artists. Essentially, and not so surprisingly, Sony is accused of self-dealing with Spotify in order to cut out their own artists from fair payment, pocketing a worringly large cut of the streaming revenues in the process. Notably, Sony isn't the only major to be implicated in the outcome of the lawsuit given that both Universal and Warner own their own sizable stakes in the streaming giant.
"On information and belief, those other record labels have engaged in the same self-dealing as Sony with respect to the diversion of payments to them, and the below market streaming royalty rates to artists," says 19 Recordings' suit. "Together, and individually, Sony and the other major record labels therefore have significant power to exert control over Spotify in order to not only dictate how revenue will be paid, but wrongfully and in bad faith divert money from royalties that must be shared to other forms of revenue that they can keep for themselves."
One of the core complaints of the lawsuit points out that the prevailing business model regards music streams as "sales" or "distributions" instead of "broadcasts" or "transmissions." The current framework grants Sony rights to a greater portion of streaming revenues than would be required if the inverse was true.
Sony is the only label targeted by 19 Recordings' lawsuit but the move could signal a potential flood of similar cases.