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    Home»Music»Universal Music Group has been sued in a class action lawsuit by artists over its ownership of Spotify.
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    Universal Music Group has been sued in a class action lawsuit by artists over its ownership of Spotify.

    pleasevisitmywebsite_3kuhkbBy pleasevisitmywebsite_3kuhkbJanuary 5, 2023No Comments7 Mins Read
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    that is rarely the case global music business It has cited itself in significant lawsuits in the music business, and that is the case today.

    Before we get into the weeds about how it happened, here are the skinnies of the suit: hip-hop duo Black Sheep, best known for their 1991 album wolf in sheep’s clothingis suing Universal Music Group in a class action lawsuit filed yesterday (January 4) in New York.

    New York-based Andres Titus and William McLean have three main allegations through their attorneys:

    • (i) Black Sheep and other artists signed to Universal should have been paid 50% of their royalties by Spotify since 2011 under the terms of their agreements regarding “net income”;
    • (ii) UMG agreed to accept a lower royalty rate from Spotify in 2008 in exchange for receiving shares in the streaming service;When
    • (iii) Black Sheep and other artists should have also received 50% of UMG’s Spotify stake (or its value); Because, according to the duo, this is “proportionate” to the royalty deal.

    Black Sheep, Universal and other artists $750 million These three claims result in unpaid royalties.

    Universal called Titus and McLean’s claims that they accepted a low royalty rate in exchange for Spotify shares “clearly false and ridiculous”. We have a track record of fighting,” he added.

    To better understand the Black Sheep case, it’s probably best to discuss two key aspects of its claims in turn. (a) Universal’s stake in Spotify and then (B) A claim that artists signed to UMG must pay 50% of royalty payments from the streaming platform.

    A) Universal’s stake in Spotify

    The Titus and McLean complaint suggests that Universal Music Group acquired a stake in Spotify as part of the original licensing agreement in 2008. Five% of a streaming company. Source of the information: MBW.

    In 2018, shortly after Spotify went public on the New York Stock Exchange, I discovered Spotify’s financial statements for 2008. This revealed the exact number of shares in the company he had distributed to four major record companies at the time: Universal Music, Warner Music and Sony. Music, and EMI. (EMI–later he was acquired by UMG–also 2% on Spotify in 2008 7% of Spotify stock

    MBW endorsed the report, in which UMG’s stake in Spotify may have fallen around December 2018 due to share dilution caused by further investment in SPOT over the next few years. presumed to be high. 3.5% mark.

    Last year, this was confirmed in UMG’s annual report for investors. 3.37% Invested in Spotify by the end of 2021.

    “Universal signs a private girlfriend deal with Spotify [in 2008] As a result, Universal agreed to accept significantly lower royalty payments on behalf of the artists in exchange for a stake in the fledgling streaming service Spotify. ”

    black sheep lawsuit

    Interestingly, Black Sheep’s lawsuit does not cite any sources for the allegation that “Universal entered into a private girlfriend deal with Spotify.” [in 2008] Universal has agreed to accept significantly lower royalty payments on behalf of artists in exchange for a stake in Spotify.”. (For clarity, this is not what MBW has ever reported.)

    The lawsuit then repeats the following unsourced allegations: wolf in sheep’s clothing When Non-Fiction to Spotify. Part of the consideration for this license was UMG’s stake in Spotify. As a result, UMG paid less royalties than Spotify would otherwise have paid., thus resulting in less royalty payments to plaintiffs. ”

    Additionally, the lawsuit attacks Universal for “failing to account for Spotify’s stake in the royalty statements it provided.” [Black Sheep] When [other artists]”

    “UMG has a track record of fighting for artist compensation, and any claim to acquire equity at the expense of artist compensation is plainly false and absurd.”

    universal statement

    On this point, the complaint adds: Over time, the value of his Spotify stake, which Universal improperly withheld from the artist, ballooned into the hundreds of millions of dollars. ”

    In fact, Universal’s stake in Spotify has never ballooned in the last two years. 3.37% Our retention on Spotify was worth it $2.3 billion February 2021, when Spotify’s stock price peaked.Spotify’s overall market cap at this point was worth $69.4 billion.

    Since then, Spotify’s market cap has dropped to about one-fifth of this size. By the end of 2022, Spotify’s market cap will be $15.25 billion – i.e. universal value 3.35% Company holdings are approximately $511 million (See below) $1.8 billion in less than a year.


    Universal’s Spotify stock has lost about $1.8 billion in less than a year. Sony Music sold half of its stake in 2018 for $768 million, but is believed to retain an approximately 2.85% stake in SPOT.

    Universal is unique among major music companies in that it retains 100% of the shares it owned when Spotify went public in 2018.

    Sony Music sells half price 5.7% About Hold on Spotify $768 million Q2 2018 (remained at about 2.85%).Warner Music sells company-wide 2% Investment in Spotify $504 millionalso in Q2 2018.

    Meanwhile, indie label collective Merlin sold its entire stake in Spotify on the first day SPOT went public on the New York Stock Exchange (April 3, 2018). $26.5 billion market cap.

    Charles Cardas, who was Merlin’s CEO at the time, explained why his organization decided not to hold a stake in Spotify after it went public. he said: As such, we worked quickly to liquidate interest in Spotify and pass the proceeds to eligible members. ”

    Like Sony Music, Universal has pledged to share the proceeds with its contracted artists if it sells its stake in Spotify.

    B) A claim that artists signed with UMG should receive 50% of royalty payments from the streaming platform

    The Black Sheep lawsuit alleges: [Black Sheep] and the [other artists] for the “use or exploitation” of “master recordings” made by Universal, among other things, the defendant’s right to monetize the artist’s work in exchange for royalties to the artist set at 50% of Universal’s “net revenues.” grant to the artist.

    This is the basis of the duo’s lawsuit. This “net income” clause in the deal required Universal to split both recorded music royalties from Spotify and the value of Spotify 50/50 shares with the signed artists.


    Black Sheep aren’t the first artists to make this kind of claim about streaming royalties in the analog age.

    Over the past decade, he has argued with major record labels that digital royalties should be split evenly with the artist rather than being paid for collection at the artist’s agreed-upon “sales” royalty rate. A number of class action lawsuits have been filed.

    This is because historic record company contracts with artists often agreed to pay. 50% Royalty rates for “licensed” uses of music (e.g. synchronous licenses) and lower royalty rates (often sub-licensed)20%) paid for music transactions defined as “sales” to the public.

    Things get complicated if these deals were made in a pre-download and pre-streaming era, and if “streaming” likely wasn’t explicitly mentioned.

    As CD sales are replaced by downloads and then streaming, artist lawyers and record label lawyers are very skeptical about whether to define streaming as the “sale” or “licensing” of an artist’s music. have presented different ideas.


    Perhaps the most infamous lawsuit was filed in 2009 by Eminem’s producer FBT against Aftermath Records/Universal over iTunes royalties. Like Black Sheep, FBT insisted it should be paid. 50% Your share of digital royalties from Universal on iTunes. The case was settled out of court in 2012 by him.

    Universal was hit with another lawsuit along the same lines by Enrique Iglesias in January 2018. 50% Net income from streaming services such as Spotify, Apple Music, YouTube and Pandora.

    By the summer of that year, Iglesias and Universal had reached their own settlement and the lawsuit was dismissed.

    In response to yesterday’s (January 4) Black Sheep lawsuit, Universal’s statement said:

    “UMG has a track record of fighting for artists’ compensation, and any claim to take fairness at the expense of artists’ compensation is plainly false and absurd. We are unable to comment on all aspects of the complaint.”global music business



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