Wixen, a Californian company that collects royalties on behalf of artists including Tom Petty, Neil Young, Janis Joplin and the Doors, alleges that Spotify "took a shortcut" when it cut deals with major labels to host their back catalogues.
Spotify allegedly filed for its IPO in December, and will go directly to the New York Stock Exchange while bypassing numerous IPO conventions. By pursuing a direct listing, Spotify can skirt underwriting fees typically required for an IPO, though the move could hurt its shares because underwriters won't be evaluating or buoying the price.
The company is the most successful in the music streaming business, with over 60m paying subscribers.More news: Saskatchewan adds 5K jobs in December: Statistics Canada
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This is just the latest legal action facing Spotify, which declined to comment on the lawsuit. A source claimed to the Wall Street Journal, however, that the suit won't in fact affect the timing for the direct listing. They alleged that Spotify had failed to adequately pay royalties for some songs on their service.
Spotify is being sued for $1.6 billion by music publishers Wixen, who allege that the streaming giant is using more than 10,000 songs without a proper licence. They claim that the company doesn't have the right license or compensation to Wixen to stream the songs. The case is Wixen Music Publishing, Inc. v Spotify USA.
Spotify has been embroiled in copyright issues in the past: in May of a year ago, the company came to a proposed $43-million settlement to resolve a class action copyright lawsuit filed by multiple songwriters.