7749080996_bee3bfbf9e_oSpotify and the National Music Publishing Association have reached a $30 million settlement agreement to compensate publishers and songwriters for unpaid royalties that resulted from unmatched songs in its database. According to the Agreement, the $30 million will constitute a “payout pool” where $5 million is a “penalty pool.” Under the Agreement, publishers will claim and provide ownership of songs in the unpaid and unmatched pool of songs, and then Spotify will compensate the publishers for the relevant number of streams. Each publisher will also receive additional payments based on their market share from the penalty pool.

Unique to this Agreement is the creation of a set of best practices for Spotify and provision of a direct licensing path between Spotify and publishers. Under the new practices, Spotify must use reasonable efforts to match all the music that it hosts, and must hold “regular discussions” on improving the matching process. Future royalty payments will be certified by an independent accounting firm.

While settlements in the tens of millions are no surprise in the music industry, creating legally binding best practices to strengthen the relationship between streaming services and publishers is. While the Agreement’s provisions are limited to publishers participating in the settlement, it is likely, or at least hopeful, that the creation of these practices will spillover into all of Spotify’s publishing dealings.

Learn more about the settlement here.

Jennifer Marr is an Entertainment and Sports Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current first year student at Harvard Law School (Class of 2018).

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