Spotify Adds $5 Million in Damages to Proposed Settlement With NMPA Over Royalties

A woman walks through a hallway at Spotify offices following a press conference in New York City.

Mario Tama/Getty Images

The National Music Publishers' Association's (NMPA's) settlement with Spotify -- which Billboard has reported on previously -- will include the streaming service paying $5 million in damages on top of the $16-25 million that the service owes music publishers and songwriters. (A source tells Billboard that the deal has yet to be signed.) Now publishers and songwriters that own their publishing will have to decide between opting in to the settlement or joining one of the class-action lawsuits filed against the service.

Since most interactive music services can't accurately report on and pay the publishers' royalties, chances are likely that the NMPA's template for its Spotify settlement will be brought to other digital services. A source tells Billboard that the template wouldn't remain exactly the same, but would retain the same general structure. When the NMPA brokered a deal between its constituents and YouTube in 2011, most opted in.

According to sources, the NMPA, and apparently publishers, would assist Spotify in building a database at the same time as publishers make claims for royalties owed. After publishers match their claims against the company's play counts, the NMPA would then dole out payment to publishers according to that play accounting. Any money left over after those claims, with the addition of the $5 million penalty, would then be doled out to publishers by market share. In exchange for collecting on the settlement(s), publishers would forfeit any past copyright infringement claims.

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The process would also include the formation of a series of best practices aimed at eliminating the program going forward. Spotify and other services claim that they have a problem because there isn't an industrywide database matching songwriters to songs and then songs to masters.

Publishers and songwriters claim that Spotify and similar services have a problem with paying publishers because they shirked their responsibility and didn't build systems to gather the data needed to properly license and pay royalties to songwriters and publishers.

Some publishers and songwriters just want to clean up the digital services' mess and have a healthy streaming economy going forward and will opt into the deal. Others resent that these services didn't build proper systems to adequately handle the responsibility of matching songwriters to publishers, then proceeded to stream songs without properly licensing and paying for them in their rush to build an industry worth hundreds of millions of dollars. They also resent that, while they will get paid what they are owed through the settlement, publishers will in effect be helping to build the database for Spotify and other services without getting compensation for the work of matching songwriters, songs and masters.

Still others see the opportunity to receive an economic windfall if Spotify and other interactive services are found by the courts to be guilty of copyright infringement and are forced to pay heavy penalties or settlements larger than the one being brokered by the NMPA.

Spotify declined comment and the NMPA hadn't responded at press time.