Spotify promises to resolve the complexities of royalty distribution of music streaming by building a system to streamline the process. As Billboard reports, at this time Spotify owes publishers and songwriters roughly $25 million in back royalties. This tally of music played by subscribers in the U.S. region of music service runs closer to around $17 million, Spotify argues.
More than $3 billion royalties have been paid out to date Spotify says, so less than one percent remains in limbo, however, the bottom line is--Spotify still owes musicians money. In this instance, songwriters and publishers can relate to Rihanna's chart fave, "B--ch Better Have My Money", which is among Spotify's catalog of songs. So why doesn't Spotify just pay up?
"Unfortunately, when it comes to publishing and songwriting royalties, especially in the United States, that's easier said than done because the data necessary to confirm the appropriate rightsholder is often missing, wrong, or incomplete," Spotify said in a blog post about its payment process. "When we confirm the rightsholder, we pay those royalties as soon as possible. To put this all in context, the royalties we have set aside amount to a fraction of one percent of all the royalties we have paid - but that doesn't change the fact that those royalties are important revenue to songwriters and publishers and we want to make sure they end up in the right hands," Spotify said.
Settlement talks are underway between Spotify, other music streaming services and the National Music Publishers' Association (NMPA). The negotiations will change the way publishing royalty payments are issued. When the smoke clears, publishers will submit their claims for money owed and the publishers' market share would receive whatever unclaimed money is leftover. As part of the deal music publishers and songwriters will give up their right to claim any licensing discrepancies they may have. Parallel to the NMPA negotiations, Spotify is butting heads with Audiam client Another Victory over holding back royalties and use of music without licensing procurement. Other music streaming services face the same distribution issues using a payment model initially designed to track physical sales and not the complexities that come along with digital music streaming.