The music service has agreed to better pay artists, or at least track down those who haven't been paid at all. The deal hinges on Spotify's ability to match songs with their lesser-known contributors.
Spotify, the Swedish leader in music streaming, reached a deal worth $21 million (18.5 million euros) with US music industry representatives to better distribute royalty payments made to artists whose contributions to songs are difficult to discern.
The agreement was announced Thursday in a joint-statement from Spotify and the National Music Publisher's Association, a legal advocate for US music corporations.
Global Head of Communications and Public Policy at Spotify Jonathan Prince reiterated in the statement that his company was committed to "paying songwriters and publishers every penny."
But royalty issues and licensing disputes have been a constant issue for Spotify, which is facing the threat of lawsuits and complaints from artists. A number of high-profile musicians - most famously Taylor Swift - have pulled their music from the site in financial protest. One of Spotify's newer rivals, Tidal, was formed under the leadership of a number of well-known artists who sought better control of royalty payments.
The settlement at hand, though, deals with "unmatched" royalties - the proper compensation of music's less-obvious contributors. Attribution beyond the song's listed performer - for a songwriter for instance - can sometimes be challenging, especially with older tracks for which the information is less readily available.
Spotify has been criticized for not making enough of an effort to track this information down.
Millions at stake
As a result of the deal, the streaming service agreed to work with music publishers to develop an improved system - including a new database and online registration portal - to match songs to all of their authors, even in tricky cases.
In addition, according to a source close to the deal who spoke to the news agency AFP under the condition of anonymity, Spotify has allotted a pool of about $16 million to compensate newly-matched authors. An additional $5 million was pledged as a penalty. Details on how these funds will be distributed are so far unknown.
"We must continue to push digital services to properly pay for the musical works that fuel their business," wrote David Israelite, President and CEO of the National Music Publishers' Association. "After much work together, we have found a way for Spotify to quickly get royalties to the right people."
Still, there are pending lawsuits against Spotify, including a $200 million complaint filed in January by songwriter Melissa Ferrick, who is seeking to turn the case into a class action lawsuit. Publishers will now have to make the choice whether to sign onto the agreement or join in on such an existing lawsuit.