On Wednesday, January 4th, hip hop duo Black Sheep filed a class action lawsuit against Universal Music Group (UMG), alleging that the record label owes them and other artists approximately $750 million in unpaid royalties. The lawsuit claims that UMG agreed to accept lower royalty rates from streaming service Spotify in exchange for equity shares in the company back in 2008.
Black Sheep argue that their contracts entitled them to 50% of royalties from Spotify and 5% of UMG’s Spotify equity, due to a clause in their contracts concerning “net receipts.”
UMG has released a statement denying the allegations, calling them “patently false and absurd.” The label maintains that it has “a well-established track record of fighting for artist compensation.” In fact, Universal has publicly pledged to share proceeds from its Spotify equity with the artists on its roster if it ever sells it.
According to the company’s annual report for investors, UMG owned a 3.37% stake in Spotify as of the end of 2021. This is lower than its reported share of just over 5% in 2008, which rose to 7% in 2018 following the acquisition of EMI, which held a 2% stake in the company. UMG’s shareholding in Spotify has decreased due to share dilutions caused by further investments.
Black Sheep, comprised of Andres Titus and William McLean, rose to fame in the early 90s with hits such as “The Choice Is Yours” from their 1991 album “A Wolf in Sheep’s Clothing.” In other Spotify-related news, the streaming platform recently launched a new feature called “Playlist in a Bottle,” which allows users to create their own music time capsule to be opened in the future.
The lawsuit filed by Black Sheep against UMG sheds light on the ongoing issues surrounding royalty payments in the music industry. As streaming becomes an increasingly popular method of music consumption, artists and labels have had to navigate complicated royalty agreements.
This lawsuit raises questions about the fairness of these agreements and whether or not artists are being adequately compensated for their work. It remains to be seen how the case will play out, but it is sure to have significant implications for both UMG and the music industry as a whole.