Warner Music has filed for an injunction in the Bombay High Court demanding that Spotify be barred from streaming songs from Warner’s catalogue, reports Bloomberg. Spotify’s launch in India is impending as the service secured a deal with T-Series last month, and accidentally announced its Indian terms and conditions coming into effect on 31 January. However, with this development, the India launch could hit a roadblock.

While Spotify and Warner Music have been talking for a while, Spotify has not inked a deal with Warner, and apparently, the companies haven’t reached an agreement, reports The Verge. Spotify said that Warner “revoked a previously agreed-upon publishing license for reasons wholly unrelated to Spotify’s launch in India.” 

In its filing for a statutory license to stream Warner Chappel Music (a division of Warner Music Group) in India, Spotify states that Warner Chappel had initially clarified that it was willing to grant Spotify a voluntary license for India, but that it suddenly and shortly prior to Spotify’s planned India launch refused to grant the license “without providing any reasonable grounds whatsoever”. Spotify sent Warner a letter on February 19 stating that it was willing to continue negotiations.

Loopholes in the Copyright Act

Spotify turned to a provision of the Copyright Act 1957 which says that broadcasters can obtain a license for copyrighted work even if the copyright owner denies use. Warner Music has challenged this with an injunction arguing that Spotify is taking advantage of a law meant for traditional broadcasters – and not for a streaming service like Spotify.

The Copyright Act, 1957, defines a “broadcast” as communication to the public. The Act was amended in 2012, adding Section 31D, which expands compulsory licensing of copyrighted works for broadcasters. However, in 2016 the Indian Copyright Office issued an addendum expanding the definition of broadcast in Section 31D to include “internet broadcasting organisations”.

Spotify is leveraging this provision in the copyright law to freely license Warner’s copyrighted work. If the case goes Spotify’s way, Warner Music could lose out on streaming payments and other revenue streams.

In its filing, Spotify explained that Warner Chappel owns a fractional shares in many songs, and Spotify cannot launch without a deal with Warner in India, as “WCM’s refusal to grant a voluntary licence would prevent Spotify from broadcasting any sound recording where WCM controls a fractional share in the underlying Works (including the sound recordings of labels other than those controlled by WMG).” 

Spotify said that Warner left it with no choice but to invoke Section 31D. In its filing, it said: 

WCM has yet to give us a reasonable justification that explains why it is refusing to grant Spotify a licence for the Works in India. This is particularly stark given that we understand WCM has licensed various other services to use the Works in India. In the absence of any reasonable justification, we conclude that WCM’s intention is to preclude our entry into the Indian market, denying Indian users of access to one of the world’s leading music services and causing irreparable harm to Spotify. This behaviour is arbitrary, discriminatory and anti-competitive.

The Spotify and India saga

Spotify’s India launch was first reported last year. Then, reports said that it would offer an extended trial period. Last month, Spotify secured a licensing deal with T-Series, and accidentally revealed its end user agreements for India, effective January 31. However, the launch was delayed to February or March citing pending deals with Sony, Universal and Warner.

Spotify in India –

  • It was reported that Spotify would be available in English, with music in five languages during the initial launch, and later look at expanding into different regional markets, as the music market in India is dominated by Punjabi, Tamil, Telugu, Malayalam and Bengali music.
  • Spotify will offer a significantly longer trial period than 30 days, which is what most music streaming services offer in India. 
  • Spotify India is headed by former OLX India CEO Amarjeet Singh Batra, Akshat Harbola heads the marketing operations in Mumbai. According to LinkedIn, Vasundhara Mudgil has been the head of communications at Spotify’s Mumbai office since September.

In an investor call earlier this month, CEO Daniel Ek said on its India launch, “Specifically, related to the Indian market, I think we’re seeing it’s a very healthy ecosystem of both homegrown players, but also international players being successful in the marketplace when it comes to other sectors… it makes us feel comfortable that we have a good chance of being a very, very strong player in the Indian market.”

Financials and worldwide users

Spotify is currently available in 78 countries with 207 million MAUs, reporting a 29% YoY growth in Q4 2018. The growth in users came from Latin America and other emerging regions; 34% of its MAUs are from outside Europe and North America. As of Q4 2018, Users listened to over 15 billion hours of content during Q4 and its engagement across ad supported and premium users grew.

Users streamed 15 billion hours of content, premium subscribers grew 36% YoY to 96 million. Revenues increased 30% YoY to €1,495 million in Q4 2018; Of this €1,320 million was premium revenues and €175 million was ad-supported revenues.