If you haven’t heard, earlier this year SoundCloud was sued by PRS for Music, a British agency that represents songwriters, in connection with copyright infringement. Soundcloud is a popular music-streaming service that has numerous problems with the music industry over the years.
PRS for Music claims that SoundCloud was infringing on PRS members’ copyrights by not obtaining licenses or paying royalty. The agency represents over 100,000 songwriters and publishers, most notably Paul McCartney and Adele
“If the streaming market is to reach its true potential and offer a fair return for our members, organizations such as SoundCloud must pay for their use of our members’ music,” Karen Buse, executive director of membership and international for PRS, wrote in a letter to the group’s members.
This lawsuit comes at an interesting time, as SoundCloud has worked to secure licensing deals with Warner Music Group, publishers, independent labels and is close to a deal with Universal Music Group.
This lawsuit is a complicated issue, with a lot of different factors at play. What will this lawsuit mean for SoundCloud, their 145 million plus users and the music industry as a whole? Music Business Worldwide does a great job of breaking down the five major factors at play, which I would like to share below.
1) SoundCloud has had 5 years to agree to a deal with PRS
SoundCloud has failed to secure a PRS license in the UK and across Europe, so it is understandable that PRS has decided to take legal action. SoundCloud claims that they were in an “active commercial negotiation” with PRS before the lawsuit hit. While PRS has stated that SoundCloud does not accept that the company needs a licence for its existing service in the UK and Europe. They have been attempting to secure a license with SoundCloud for five years.
2) This all hinges on ‘Safe Harbour’
SoundCloud has stated that they are complying with Safe Harbour law because they take down any infringing material when requested by rights-holders. Soundcloud contends that the users are ultimately responsible for such transgressions since they are the ones distributing the content. Safe Harbor laws exist to protect those who have innocently hosted or made available illegal content.
3) YouTube will be watching closely
There is currently no legal precedent to base this case off of, which makes it difficult to determine exactly what will result from this lawsuit. However, should PRS win the case, there will likely be serious repercussions for other completely free music services, specifically YouTube.
4) Conflicts of interest
It is believed that Warner Music Group acquired 5% equity in SoundCloud when they signed their licensing deal last year. An equity giveaway was also likely to be a part of their other licensing deals as well. Warner Music Group and Universal Music Group both fully own publishers who are also members of the PRS in the UK. Therefore, it will be interesting to see if their names appear in the lawsuit. This could potentially mean that these companies would be attempting to obtain millions of pounds from a business that they own a stake in.
5) If PRS wins, who gets the money?
If SoundCloud ends up having to pay PRS for its use of music, the resulting division of that money should be interesting to watch. Should it be re-distributed based on market share then Sony/ATV and other publishers should stand to benefit. However, this would certainly upset the individual creators who make up a significant portion of the activity on SoundCloud.