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Black Sheep Sues Over Spotify Stock Sales, Alleging Universal Owes Them More Than $750 Million In Unpaid Royalties

The legendary hip-hop duo claim an early “sweetheat” arrangement with Spotify should deliver them millions.

Black Sheep have filed a class-action lawsuit against Universal Music Group.

According to Rolling Stone, the legendary hip-hop duo alleges that the label owes more than $750 million in royalties to numerous artists who signed to the label in an early “sweetheart” arrangement with Spotify. That deal allowed the streaming company to pay less in royalties in exchange for stock.

The artists are suing Universal for breach of contract, breach of duty of good faith and fair dealing, and unjust enrichment, Pitchfork reports.

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According to Andres “Dres” Vargas Titus and William “Mista Lawnge” McLean, Universal “is withholding hundreds of millions of dollars in royalties” due to a “previously undisclosed” agreement with Spotify. As a result the “sweetheart” arrangement allowed Spotify to license music from the label at a discounted rate “in exchange for Spotify stock and lower royalty payments.”

“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,” The ‘90s duo allege in their lawsuit. “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 owned under Universal’s contract.”

Subsequently, Dres and Mista Lawnge allege the deal violated their 1990 contract with Polygram (which later merged under the Universal umbrella). That contract reportedly stipulated that Universal must pay 50 percent of all net receipts connected to the “use or exploration” of their music to the artists themselves based on the label’s standard recording contract.

“Universal not only has breached its contract with Plaintiffs by failing to compensate them for the depressed royalty payments made possible by UMG’s deal with Spotify, but it also concealed from Plaintiffs and the Class that the Company had received and retained 100 percent of its Spotify stock,” the lawsuit adds. “This additional wrong prevented Plaintiffs and the Class from questioning their royalty payments.”

Additionally, the hip-hop duo says “the Class encompasses at least thousands of artists whose identities can be readily ascertained from Universal’s records,” though it doesn’t know exactly how many artists were affected.

Universal Music Group has since released a statement to Rolling Stone, reading: “Universal Music Group’s innovative leadership has led to the renewed growth of the music ecosystem to the benefit of recording artists, songwriters, and creators around the world. UMG has a well-established track record of fighting for artist compensation and the claim that it would take equity at the expense of artist compensation is patently false and absurd. Given that this is pending litigation, we cannot comment on all aspects of the complaint.”

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