Friday, March 18, 2016

Spotify and Publishing Group Reach $30 Million Settlement Agreement Over Unpaid Royalties

Written by Ed Christman — The National Music Publishing Association (NMPA) has announced its successful brokering of a settlement between Spotify and its constituents over unmatched (songs that haven't received payment because Spotify didn't identify their publishers) and unpaid song royalties, a topic that has given rise to several legal cases against the streaming services over the past few months. The settlement process will begin in early April with a three-month opt-in period that will allow NMPA members to participate in the disbursement of an estimated $30 million payout pool. The agreement covers the period between Spotify’s inception though June 30, 2017, with an automatic renewal period tacked on through for another 2 years, through June 30, 2019.

While the announcement doesn’t disclose the pool's exact size, sources tell Billboard it will be funded with around $25 million from Spotify, with an additional penalty pool (or bonus pool, if you're a publishing company) of $5 million.

By claiming and proving ownership of songs in the unpaid and unmatched pool of songs, publishers will be paid their share from actual plays of those songs to be drawn from that $25 million. A portal for claimants will open following the conclusion of the opt-in period.

In addition remuneration from their claims, publishers will receive further payment, based on each publisher’s estimated market share as calculated by the NMPA, from the $5 million penalty pool.

Finally, any funds left over from the pending and unmatched funding pools for each period will be divided among participating publishers based on their market share on Spotify during that royalty period.

Participating publishers and Spotify will also agree to a set of best practices that will require Spotify to make a reasonable effort to match all music usage going forward, and to hold regular discussions on how to improve the pending and unmatched process between the service and publishers.

In exchange for participating in the settlement, publishers release Spotify from any claims related to the identified pool of pending and unmatched works. If publishers have other claims against Spotify not related to that pool they can continue to press on those. The settlement also provides a path to direct licensing between Spotify and publishers, with the goal of strengthening business relationships, according to the announcement.

In addition to all the above, an independent accounting firm will be hired to certify that payments for each royalty period have been properly calculated before funds are distributed. Moreover, publishers with five percent or more of market share within the service can audit Spotify once per royalty period for all uses, not just for pending and unmatched royalties. Smaller publishers will be given the option to combine their shares and audit collectively in the same way.

“As we have said many times, we have always been committed to paying songwriters and publishers every penny,” Spotify global head of communications and public policy Jonathan Prince said in a statement. “We appreciate the hard work of everyone at the NMPA to secure this agreement and we look forward to further collaboration with them as we build a comprehensive publishing administration system.”

“NMPA’s goal has always been to ensure publishers and songwriters receive the money they deserve,” NMPA president and CEO David israelite said in a statement. “I am thrilled that through this agreement both independent and major publishers and songwriters will be able to get what is owed to them. We must continue to push digital services to properly pay for the musical works that fuel their businesses and after much work together, we have found a way for Spotify to quickly get royalties to the right people. I look forward to all NMPA members being paid what they are owed, and I am excited about the creation of a better process moving forward.”

The majority of publishers opted into the NMPA's settlement with YouTube from 2011, and are likely to do so here. Some publishers and songwriters are upset that Spotify has been using their music, in some cases for years, without properly licensing their music, let alone paying mechanical royalties on the work. In addition to filing class action lawsuits against Spotify and other streaming services, some publishers grumble that the penalty pool should have been more than $5 million, considering the possible $150,000 per song fine for infringement, the maximum allowed under the law. On that final point, Israelite says that “this was the same criticism when we settled with Youtube, and we turned out to be right on that one too.”

“I feel strongly that publishers that opt-in to our settlement is the best of all the options [for pending and unmatched payments] available to them,” continues Israelite. “NMPA has a 12-year track record of being right on these questions.”

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