Spotify settles NMPA mechanicals claim

April 2016

Music Publishing, internet



Spotify has agreed a settlement deal with the National Music Publishers’ Association (NMPA) which will ‘allow independent and major publishers to claim and receive royalties for certain compositions used on Spotify in the United States where ownership information was previously unknown’ although one commentator noted that the problem was less of Spotify not paying and more that  “America’s long inefficient mechanical licensing framework is really behind the unpaid monies” something more in the hands of the NMPA than Spotify. The digital services argue that a lack of decent copyright data – in particular a database that states which song copyright is contained within any one recording – makes it impossible for them to file the paperwork required by the compulsory licence.
Services can license the mechanical rights in songs under a compulsory licence in America, which sets a standard rate. But under that licence the digital service must alert the rights owner that their songs are being used and arrange to pay the statutory royalties. In many cases this hasn’t happened, with the streaming firms arguing that they don’t know what songs are embodied in what recordings, because the labels don’t tell them.
The NMPA said that agreement, which comes after two $100m+ class action lawsuits against Spotify over alleged unpaid mechanical royalties in the US , establishes a ‘large bonus compensation fund that is a substantial percentage of what is currently being held by Spotify for unmatched royalties’. Billboard reported earlier this month that the total settlement will involve $5 million in damages on top of the $16-25 million that Spotify owes music publishers and songwriters for unmatched works. The $25m sum will be shared amongst publishers and songwriters based on the usage of their music, while the further $5m will be split between publishers on a market share basis.
the NMPA said the deal would “create a better path forward for finding the owners of publishing rights who should receive streaming royalties” by “improving processes for identifying and compensating writers for their work and establishing a better database for future payments”. Any royalties associated with works that remain unmatched after each claiming period will be distributed to publishers and songwriters who participate in the settlement, but the agreement will not affect the royalties owed to any publisher or writer who does not choose to participate.
The National Music Publishers’ Association President and CEO David Israelite said: “NMPA’s goal has always been to ensure publishers and songwriters receive the money they deserve. 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.”
Spotify Global Head of Communications and Public Policy Jonathan Prince said, “As we have said many times, we have always been committed to paying songwriters and publishers every penny.
The streaming service’s lawyers are also concurrently trying to have class action status denied to the highest profile of the lawsuits it is fighting, which was launched by David Lowery late last year. By setting a deadline for the settlement, and with the class action status of the Lowery litigation still to be determined by the judge, that could provide another incentive for publishers and songwriters to join the settlement party. Even if some feel that the deal as it is currently set up favours the bigger publishers. Lowery’s lawyers Michelman & Robinson pre-empted the NMPA deal by issuing its own statement to the songwriting community earlier this week. The law firm said: “It is impossible to determine the true benefit to songwriters [of the settlement] because the settlement negotiations between NMPA and Spotify have been conducted without court oversight”.
“This is a massive, widespread problem,” David Lowery told Billboard. It’s been two months since the Cracker and Camper Van Beethoven frontman filed a proposed class-action copyright lawsuit against Spotify, which says the service hasn’t been paying all the royalties it owes music publishers for the songs it streams, and the headlines of a potential $150 million in liability are fading. “To quote John Goodman in The Big Lebowski, ‘Am I the only one who gives a shit about the rules?'”


And the musician who has sued Tidal over allegedly unpaid mechanical royalties has seemingly settled with Microsoft over the same issue. In fact, it seems that John Emanuele of American Dollar is aiming for a ‘full set’ of mechanical royalty lawsuits, with litigation launched against Google Play and Slacker as well as Tidal and Microsoft.  The core complaint in the lawsuit mirrors that in the legal actions being pursued by David Lowery and Melissa Ferrick against Spotify in that the streaming services failed to comply with the administrative requirements of the compulsory licence that covers the so called ‘mechanical rights’ in songs in the US, and therefore streamed those works without licence.


“The law is pretty black and white,” said Donald Passman, a veteran music business lawyer and the author of All You Need to Know About The Music Business. “If you’re using someone’s songs, you have to pay them.”


And in related news, the Copyright Royalty Board has sent its March 4th decision to the U.S. Copyright Office Register for legal review. Thus begins the countdown for their determination to become a U.S. Federal Regulation, which would set a rate of $0.0017 per play for free-to-the-consumer-streaming services and $0.0023 to paid subscriber streaming services.

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