Dance music brand Ministry of Sound is suing Spotify for copyright infringement, claiming the streaming music company has refused to delete users' playlists that copy its compilation albums.
Ministry of Sound launched proceedings in the UK High Court on Monday, and is seeking an injunction requiring Spotify to remove these playlists and to permanently block other playlists that copy its compilations. The company is also seeking damages and costs.
Chief executive Lohan Presencer claims that his company has been asking Spotify to remove the playlists – some of which include "Ministry of Sound" in their titles – since 2012
"It's been incredibly frustrating: we think it's been very clear what we're arguing, but there has been a brick wall from Spotify," said Presencer.
A Spotify spokesperson confirmed to the Guardian that it had received the lawsuit, but declined to comment further.
While Presencer is known to be no fan of Spotify according to industry sources, the lawsuit came as a surprise to the company. The Guardian understands that Spotify has held talks in the past with Ministry of Sound about licensing tracks from its label division, albeit without a deal being struck.
The case will hinge on whether compilation albums qualify for copyright protection due to the selection and arrangement involved in putting them together. Spotify has the rights to stream all the tracks on the playlists in question, but the issue here is whether the compilation structure - the order of the songs - can be copyrighted.
Similar arguments featured in a high-profile case in 2010, when the High Court ruled that the English and Scottish football leagues could protect their fixture lists on copyright grounds. However, this ruling was later overturned on appeal.
"What we do is a lot more than putting playlists together: a lot of research goes into creating our compilation albums, and the intellectual property involved in that. It's not appropriate for someone to just cut and paste them," said Presencer.
Playlists are an increasingly prominent feature on Spotify's service, which provides its users with a catalogue of more than 20m music tracks to stream.
Spotify's 24 million users have created more than 1bn playlists since its launch in 2008. In August, Spotify launched a new "Browse" feature to help people discover one another's playlists more easily.
"Everyone is talking about curation, but curation has been the cornerstone of our business for the last 20 years," said Presencer.
"If we don't step up and take some action against a service and users that are dismissing our curation skills as just a list, that opens up the floodgates to anybody who wants to copy what a curator is doing."
This hints at the wider context for Ministry of Sound's lawsuit, as its compilations business adapts to a new world of streaming music and user-generated, shareable playlists.
The company has sold more than 50m copies of its compilations in the 20 years since it was founded, but streaming is more problematic: the vast majority of tracks on those compilations have been licensed from other labels.
"When we license our compilations, which include a lot of major-label repertoire, they do not grant us the rights to stream those compilation albums," said Presencer.
His company does have a separate label business that signs and develops artists, and owns the rights to sell and stream their music. Thus far, Ministry has not made these tracks available to stream on Spotify.
However, NOW's joint owners are major labels – Universal and Sony – who are both shareholders in Spotify, and also own the rights to a significant proportion of tracks on the NOW compilations, thus earning money from streams of those tracks on Spotify.
As things stand, a Ministry of Sound Spotify app would only make money from streams of tracks signed to its label division. "Spotify only remunerates you for content ownership. It doesn't pay you if you're compiling third-party content," said Presencer.
"We've been asking them about this for the past four years, and have tried to engage in dialogue with them on how they would remunerate us for curation. They've said they don't have a structure for that in their model."
The risk for Ministry of Sound with its lawsuit is in looking like a company trying to protect its existing business model – compilation sales – at the expense of a new form of music consumption that is appealing to a growing number of people.
"Our digital compilations business is up 30% this year, and our international digital compilations business is up over 100% this year. That's double and triple-digit growth year-on-year," said Presencer.
"That doesn't strike me as being an old business model. Just because something is new doesn't mean something is good."
In a blog post published on the Guardian website this morning, Presencer went into more detail on that point, criticising Spotify's business model on the grounds that it has made sustained losses since the service launched in 2008.
A quarter of its 24 million active users currently pay for Spotify, and while the company's 2012 revenues rose 128% year-on-year to €434.7m (around £377.9m), its net losses increased from €45.4m in 2011 to €58.7m in 2012.
For its part, Spotify has said it expects to pay more than $500m to music rightsholders in 2013, taking it to more than $1bn in total payments since its launch.
The company has faced criticism from artists over the size of its payouts for streams of their music, most recently when Thom Yorke and Nigel Godrich's Atoms for Peace removed their albums from Spotify and rival services in July.
Presencer confirmed that Ministry Sound is only suing Spotify, but said it is monitoring rivals. "We are looking at every service," he said.
"There are other services that have playlists, and when we have seen this happening – playlists using Ministry of Sound's name – when we have notified them, they have willingly taken them down. It's only against Spotify that we've hit this brick wall."