Credit Michael Loccisano/Getty Images For Spotify
Spotify will pay more than $ 20 million to music publishers to settle a long-running and complex dispute over licensing, according to an agreement announced on Thursday between the streaming service and the National Music Publishersâ Association, a trade group.
Exact terms of the deal were not disclosed. But according to several people involved with the settlement on both sides, who spoke on the condition of anonymity to discuss confidential financial terms, Spotify will pay publishers between $ 16 million and $ 25 million in royalties that are already owed but unpaid â the exact amount, these people said, is still undetermined â as well as a $ 5 million penalty. In exchange, the publishers will refrain from filing copyright infringement claims against Spotify.
The settlement concerns mechanical licensing rights, which refer to a copyright holderâs control over the ability to reproduce a musical work. The rule goes back to the days of player-piano rolls, but in the digital era mechanical rights have joined the tangle of licensing deals that streaming services need to operate legally.
Over the last year, it emerged that Spotify â which has long trumpeted itself to the music industry as a law-abiding partner â had failed to properly obtain the mechanical licenses for large numbers of songs.
The lack of mechanical licenses looms as a major liability for streaming services, and the publishersâ association estimates that as much as 25 percent of the activity on these platforms is unlicensed. Several musicians filed class-action suits seeking as much as $ 200 million in damages for copyright infringement.
Spotify countered that it lacked the data to sort out which publishers had legitimate claims over songs, or even how to locate all the parties, because no central and authoritative database existed covering all music rights. Late last year the company committed to developing an administrative system to solve the problem, but by then its settlement talks with the publishers were already underway.
The gaps between what Spotify, Apple Music and others offer have been getting bigger and more complicated as artists have wielded more power in withholding their music from one outlet or another.
âI am thrilled that through this agreement, both independent and major publishers and songwriters will be able to get what is owed to them,â David M. Israelite, the president of the publishersâ association, said in a statement.
Jonathan Prince, a spokesman for Spotify, added, âAs we have said many times, we have always been committed to paying songwriters and publishers every penny.â
According to the terms of the deal, participating publishers will use an online portal to register their claims over songs, and then receive their share of royalties owed as well as their portion of the bonus fund. Any unclaimed money would be divided according to the publishersâ market share.
The deal is likely to serve as a template for settlements with other services. In recent months, infringement suits have been filed against Rhapsody, Google, Tidal and others.
While the deal takes some pressure off Spotify, it has already been criticized as details of the settlement talks â ostensibly private and confidential â were leaked widely in recent weeks.
âThe N.M.P.A. settlement does not address the problem and it does not fix it,â said Jeff Price, the chief executive of Audiam, a company that specializes in tracking down unpaid royalties online and has tussled with Spotify in the past over publishing data.
The settlement will most likely reduce the size of the class-action suits filed against Spotify. Representatives of several publishers said that they expected many publishers, large and small, to participate in the settlement. Mr. Price said that Audiam would pursue its own settlement talks on behalf of its clients.
The low penalty from the National Music Publishersâ Association settlement, Mr. Price said, ârewards bad behavior.â