A comedy of errors: Spotify makes the mistake of locking out hundreds of comedians

According to author Chris Castle, the ice Spotify is standing on just got a lot thinner. Keep reading to find out why.

A guest post by Chris Castle of MusicTechPolicy.

If screwups were Easter eggs, Spotify CEO Daniel Ek would be the Easter Bunny. Like a 21st Century Homestead Strike, Spotify has locked out hundreds of comedians from its monopoly streaming platform according to numerous press outlets including the Wall Street Journal and CNBC. Some comedians have evidently signed up to a new licensing organization called “Spoken Giants” which is pursuing a license with Spotify. (More on them later.) The streamer pulled a Google and said:

“Spotify has paid significant amounts of money for the content in question, and would love to continue to do so,” according to a Spotify statement to CNBC. “However, given that Spoken Giants is disputing what rights various licensors have, it’s imperative that the labels that distribute this content, Spotify and Spoken Giants come together to resolve this issue to ensure this content remains available to fans around the globe.”

The Spotify Stuffshow Continues: So let’s unpack that statement. First, the fact that Spotify has paid “significant amounts of money for the content” doesn’t matter if they paid it to someone who doesn’t own all the rights. Given Spotify’s abysmal track record with clearing rights (many, many, many tens if not hundreds of millions in damages later), it should come as no surprise to anyone that Spotify still doesn’t have its act together. So the answer to talking point #1 is great, but you paid the wrong person.

All You Need is Love–But the Rights Help: If you followed Spotify’s public statements around the many songwriter lawsuits that led to Title I of the Music Modernization Act, you’ll recognize the “would love to continue to do so” threat. As in, that’s a nice little record you have there, be a shame if something happened to it.

It’s Called Indemnity: Spoken Giants is attempting to negotiate with Spotify for the right to reproduce and publicly perform the actual spoken words in the comedy act–almost always written by the comedian. Notice how this is written: “given that Spoken Giants is disputing what rights various licensors have“. That passive voice “is disputing” is the key. If the licensor (like Audible, for example) represented to Spotify that they had the rights for the comedian’s copyright, rather than just the recording which the licensor may own, then along with that would have gone and indemnification. In which case, Spotify would just have turned the claim from Spoken Giants back to the licensor and demanded indemnity. 

They didn’t, apparently. If they had, there would likely have been no conversation with Spoken Giants at all. Which means that it’s entirely possible that Spotify knew they had to clear the comedian because the contract said they did–just like their deals with record companies for music requires them to clear and pay publishing. Which they failed to do, repeatedly. 

What Spotify knew and when is going to be an issue here when the comedians sue Spotify. Which seems highly likely. 

And note it’s not just comedy that’s in this situation, it’s also potentially any spoken word recording.

So here it is:

First, Spotify has done to comedians what it did to songwriters who complained that the company was unlawfully profiting from their works—close the door after the horse has left the barn with a lockout.  

The difference with comedians is Spotify doesn’t have a headlock on exploitation like they do with their dominant if not monopoly music service.  Plus, comedians are likely to make fun of them because they are…comedians.   Maybe Daniel Ek didn’t get the message that every guest on a comedy show receives:  Don’t try to be funny.  But ask yourself—what do you think would happen if you offend a bunch of comedians because they are comedians?

From a rights perspective, I think if you check the legal lines for recordings by comedians, you’ll see that the performer commonly claims the © copyright.  In this regard, a comedy recording is no different than any other recording: There are two copyrights concerned, one in the sound recording (the ℗ copyright) and a separate copyright in the work recorded (the © copyright).  

I would assume that to the extent that there is a record company or spoken word company involved that owns or administers the comedian’s sound recordings, they would license the recording to Spotify and Spotify would be obligated to license the © copyright directly from the comedian, just like Spotify is required to license the song directly from the songwriter or her publisher and PRO.  There are also well-known cases of comedians owning 100% of their own works (like Louis CK https://musictechpolicy.com/2012/07/09/the-success-of-louis-c-k-is-not-a-joke-on-anyone/) so in that case Spotify would have to license both rights from the comedian or her loanout.  

That means that Spotify’s expectation that a label will license works owned by the comedians doesn’t make much sense because a label can’t license what it doesn’t have.  The fact that Spotify is engaging with anyone to license the © copyright other than the label, suggests the obvious—the label can’t license the comedian’s share if they even own it or administer that share. And it’s highly likely that the license agreement between the label and Spotify says exactly that.

A big difference between a comedy recording and a song is that Congress’ paternalism has only reached songwriters—Congress compels them to license their songs for recordings through the statutory license and also tells them what they may charge.  Recall Congress set that rate at 2¢ for decades and recently did it again with physical mechanicals when they set the rate at 9.1¢ in 2006 and want to keep it frozen until 2027.  There has never been a free market for mechanical royalties in the US.  

On the other hand, comedians are not subject to a compulsory license or statutory rate so have a chance at a free market rate through individual negotiation or at least extended collective licensing. Spotify is required to license the © copyright from the comedian to the extent that the comedian retained the © copyright.  In case you haven’t noticed, Spotify does not do well with artist relations.  They have been the subject of a major class action that spooked them so badly they had to change the Copyright Act to write in a safe harbor for themselves.  They also mismanaged that giveaway in my view and were promptly sued by Eminem’s publisher.  We’re all waiting to see the outcome of that lawsuit (which also names the Harry Fox Agency, so word to the wise at Spoken Giants).

If Spotify were offered a chance to bargain collectively, they probably should take it.  But their behavior in the past does not suggest they have any intention of bargaining fairly.  They are more likely planning on trying to use their considerable lobbying muscle and billions to break any strikes.  Hence their move to lock out those attempting to collectively bargain.

Spoken Giants is evidently trying to model themselves after the music business (which is something of a head scratcher—why would you model yourself after a failed compulsory license).  However, my bet is that those negotiations, however misguided, will only result in Spotify using Spoken Giants as an example of how this poor little start up from Sweden needs the protection of the government after its second billion dollar stock buyback.  

Remember, Spotify just hired the former General Counsel of the US Copyright Office to run their Washington lobby shop and shillery (who was principally responsible for writing the regulations implementing the new Mechanical Licensing Collective that benefits Spotify).  Jamming comedians seems like it would be Job 1 for her so that Spotify could shove more creators under the government’s boot.  And then there’s Daniel Ek’s investment in digital munitions—nothing like defense contracting to get burrowed into the establishment.

If Spoken Giants wants to model itself after the music business, they should be planning their class action now as well as a preemptive strike in DC.  That’s the only thing that Spotify seems to respond to. From my point of view, it looks like a reasonable case for a well-defined class.  Comedians should start filing any errant copyright registrations.