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Spotify Settles Licensing Dispute for $30M

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By Christopher Coble, Esq. on March 22, 2016 4:03 PM

Music streaming service Spotify will pay up to $25 million in royalties and a $5 million penalty to settle a long-standing licensing dispute with the National Music Publishers' Association (NMPA). The issue concerned royalties for "unmatched" songs for which Spotify couldn't or didn't identify the original publisher.

So who gets paid what, and what does this mean for other streaming sites?

Fixing the Past

Uncompensated NMPA members will be able to opt in to participate in the disbursement of somewhere between $16 and $25 million, depending on how many publishers come forward with claims. Publishers will be required to provide proof of ownership for unpaid and unmatched songs. Additionally, as Billboard magazine reported, "publishers will receive further payment based on each publisher's estimated market share as calculated by the NMPA, from the $5 million penalty pool."

While the exact terms of the settlement have not been released, it is believed to cover the time from Spotify's inception up to June 30, 2017.

Playing the Future

Spotify claims this was an innocent mistake, that without a central, authoritative database existed covering all music rights, there was no way to determine which publishers had legitimate claims over songs, or even how to contact and compensate those publishers. "As we have said many times," asserted spokesman Jonathan Prince, "we have always been committed to paying songwriters and publishers every penny."

In order to avoid future issues with mechanical licenses, the NMPA and Spotify will create a set of best practices under which Spotify will make reasonable efforts to match all music usage going forward. Publishers and Spotify will also meet regularly to determine how to improve the pending and unmatched process between the service and publishers. Therefore, there's a good chance this settlement becomes a model for other music streaming services like Pandora, Tidal, and Apple Music.

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