Three-quarters of a billion dollars are on the line in a new class-action lawsuit filed against Universal Music Group, according to Rolling Stone. The suit is spearheaded by classic rap duo Black Sheep, who are best-known for their 1991 hit “The Choice Is Yours (Revisited).” The duo was also part of the Native Tongues collective which included A Tribe Called Quest, De La Soul, and Queen Latifah.
Their lawsuit alleges Universal Music Group accepted both cash and company stock from Spotify in exchange for its labels’ music, but only paid royalties to its artists from the cash received from Spotify, cutting artists out of more than $750 million in royalties. Black Sheep argues that this violates the original terms of their 1990s contract with Polygram (since folded into the UMG umbrella), under which the label would have paid 50 percent of all net receipts from Black Sheep’s music.
The suit claims, “In the mid-2000s, Universal struck an undisclosed, sweetheart deal with Spotify whereby Universal agreed to accept substantially lower royalty payments on artists’ behalf in exchange for equity stake in Spotify – then a fledgling streaming service. Yet rather than distribute to artists their 50 percent of Spotify stock or pay artists their true and accurate royalty payments, for years Universal shortchanged artists and deprived plaintiffs and class members of the full royalty payments they were owed under Universal’s contract. For approximately a decade, Universal omitted from the royalty statements Universal issued to plaintiffs that it had received Spotify stock in connection with the ‘use or exploitation’ of Black Sheep recordings.”
According to the documents filed in Manhattan federal court, Universal valued its stake in Spotify at around $1.7 billion as of September 2021, with “substantial portion” of that coming from the above-mentioned deal. Since Universal could have withheld royalties from “thousands of artists” that have been signed to UMG’s subsisdiaries over the years, Black Sheep says they don’t know the “exact size” of the lawsuit’s possible class but that certification is forthcoming and that Universal’s records can reveal more information once subpoenaed.
The implications of this lawsuit could be massive, as streaming royalties have been at the center of numerous controversies at DSPs like Spotify, Apple Music, and Tidal for years.
