The fight over Spotify launching in India might change Indian copyright law and shape how streaming services and labels interact worldwide.

Earlier today, Bloomberg reported that Warner Music Group had asked an Indian court to block Spotify from being able to play music from its catalog on the streaming service. Spotify is set to launch in India, even though it hasn’t secured a license to Warner’s catalog. But, according to Indian law, it might be able to use music from Warner’s publishing division, Warner/Chappell Music, anyway. At the crux of this lawsuit: a 2016 reinterpretation of a 2012 amendment to a 1957 law that Spotify is using in 2019 as leverage against Warner in a global licensing fight.

Spotify and Warner had been in licensing discussions but couldn’t come to terms. According to Spotify, Warner “revoked a previously agreed-upon publishing license for reasons wholly unrelated to Spotify’s launch in India.” Because Warner owns a tiny percentage of so many songs, Spotify says it simply can’t launch in India without a deal. As a result, Spotify turned to a controversial provision of India’s copyright law, which says “broadcasters” can obtain a license for copyrighted works even if the copyright owner denies use.

Warner has asked India to block this request, saying Spotify is taking advantage of a law meant for traditional broadcasters — radio and television — not on-demand streaming. “After months of negotiations,” says Warner, “Spotify abruptly changed course and has falsely asserted a statutory license for our songwriters’ music publishing rights in India. We had no choice but to ask an Indian court for an injunction to prevent this. It’s our goal to hammer out a deal that works for everyone. We hope this is just a speed bump in the expansion of our long and successful global partnership.”

“Spotify abruptly changed course and has falsely asserted a statutory license”

In Spotify’s filing for the statutory license (seen below), it says, “WCM has yet to give us a reasonable justification that explains why it is refusing to grant Spotify a licence for the Works in India. This is particularly stark given that we understand WCM has licensed various other services to use the Works in India. In the absence of any reasonable justification, we conclude that WCM’s intention is to preclude our entry into the Indian market, denying Indian users of access to one of the world’s leading music services and causing irreparable harm to Spotify.”

India’s Copyright Act of 1957 has been amended six times in total, but the portion that applies to Warner’s grievance with Spotify begins with a change passed in 2012. This was when the controversial section 31D was added, which expands compulsory licensing of copyrighted works for broadcasters.

Of all the things that have changed in India’s copyright law through the years, there’s one part of it that hasn’t — the definition of “broadcast.” It’s the same today as it was when the act was passed in 1957 and is only defined by “communication to the public.” In 2016, the Indian Copyright Office issued a memorandum expanding the definition of “broadcast” in 31D, stating that “the provisions of section 31D are not restricted to radio and television broadcasting organizations only, but cover internet broadcasting organizations also.” This expanded interpretation is what Spotify is relying on to gain access to Warner’s catalog — and presumably to gain leverage and bring Warner back to the negotiating table.

there are major revenue consequences for Warner if Spotify prevails

The potential for streaming services to use India’s copyright law as leverage against labels isn’t a total shock, and is internationally controversial. Kwee Tiang Ang, the Asia-Pacific regional director of the International Federation of the Phonographic Industry, raised concerns about 31D being used in this manner last year, saying, “If India continues to apply the Section 31D interpretation, it would run foul of obligations under international treaties. IFPI is happy to work with the Indian Government to iron out this issue and ensure that particular online interactive transmissions are not subject to a compulsory license.”

Legal fight aside, there are major revenue consequences for Warner if Spotify prevails. The usual voluntary agreements between broadcasters and labels can contain terms that are well beyond the scope of how much is paid out per stream. Sony’s deal with Spotify, for example, also included a cut of ad sales revenue and up to $9 million in additional ad spots. If Spotify is able to sidestep a direct deal with Warner in India, then Warner potentially loses out not just on streaming payouts, but on a myriad of alternative revenue streams. And those other revenue streams are a big deal in emerging markets like India.

Most people in India get their music for free, and those who pay don’t pay much. For example, an Apple Music subscription in India costs 120 rupees, or $1.69, compared to $9.99 a month in the United States. It’s likely that Spotify’s ad-free price will land at around the same mark, and its primary revenue in India will come not from subscriptions, but from ads and telecom subsidies, money that Warner won’t be able to touch if Indian courts side with Spotify.

It’s unclear why Warner and Spotify have so far been unable to land on a deal — Warner has deals with other streaming services in India, like freemium music streaming service JioSaavn. It seems Warner knows Spotify needs to launch in India in order to grow, and is using its power to block that launch to extract some other concessions. What happens next could change how artists, labels, and streaming services work in India for years to come. Read Spotify’s filing in India for a statutory license for Warner/Chappell Music works below.