“Andrus Titus and William McLean, the duo comprising the 1990s rap group Black Sheep, filed a lawsuit in January, alleging that Universal Music Group (UMG) breached their contract by accepting reduced Spotify royalty payments in 2008 in exchange for Spotify stock. The artists, who signed a 1990 record deal with Polygram Records, claim they are entitled to 50% of ‘net receipts’ for the use of their Master Recordings, with PolyGram later merging into UMG in 1998.
In their complaint to the US District Court for the Southern District of New York, Titus and McLean argued that UMG made an undisclosed deal with Spotify, accepting lower royalties for artists in exchange for Spotify equity. They asserted that UMG should compensate artists with 50% of its Spotify stake or its equivalent cash value.
UMG countered the claims, dismissing the lawsuit as ‘patently false and absurd,’ emphasizing its commitment to artist compensation.
UMG initially acquired a 5% stake in Spotify in 2008, increasing to 7% after acquiring EMI, which held a 2% stake. However, due to stock dilution, UMG’s share had decreased to 3.3% by the end of 2022, valued at approximately $1.16 billion at Spotify’s current market price.
In a November 20 ruling, US District Court Judge Jennifer L. Rochon rejected the proposed class-action suit, citing several grounds. The judge argued that Titus and McLean took too long to file, UMG’s Spotify stake doesn’t meet the ‘net receipts’ definition for royalties, and their contract granted UMG the right to negotiate Spotify royalties.
The judge noted the contract’s two-year statute of limitations, highlighting that the plaintiffs failed to bring claims within the specified period. She concluded that UMG did not breach the contract by accepting a lower Spotify royalty, given its discretion in distribution and exploitation.
The ruling also rejected the plaintiffs’ request to amend their complaint, deeming it ‘futile.’ This case is part of a broader trend where artists and record companies dispute streaming-era royalty accounting, reminiscent of past cases involving artists like Enrique Iglesias and Eminem.”
