Did you think that Spotify’s recent settlement of a class-action songwriters lawsuit over mechanical royalties and licensing would be an end to the streaming service’s challenges in that area of the business?

In a year when Spotify is moving steadily towards its long-awaited IPO, of course not. And it’s the US that continues to provide the key flashpoint for the company’s headaches around the publishing side of the industry.

Flashpoint one: two more lawsuits filed on behalf of songwriters who claim their works are being made available through Spotify without the correct licensing in place.

One comes from Frankie Valli and the Four Seasons founding member Bob Gaudio, while the other comes from Bluewater Music Services Corporation, which manages the publishing rights for a group of country-music songwriters.

The Bluewater suit alleges 35bn unpaid-for-streams and $15m of missing royalties, with royalty-collecting firm Audiam “assisting” both lawsuits, according to The Hollywood Reporter.

Flashpoint two: rumbles of discord from the National Music Publishers Association (NMPA) despite its settlement agreement with Spotify over the unlicensed-mechanicals issue in March 2016.

The New York Post has been leaked details of tetchy communications between the pair, including the NMPA’s concern that its members, unlike labels, have no equity in Spotify and will thus get no windfall from an IPO of the company.

The NMPA also appears to be accusing Spotify of failing to pay songwriters royalties even when their contact details were “clearly available in the records of the copyright office”.

No beating about the bush here: the system for identifying and paying mechanical rightsholders in the US is a mess, and a big headache for every streaming service, not just Spotify.

But the questions about how much the failure to license and pay songwriters is attributable to that mess and how much to issues within a streaming service continues to be a live debate.

Some of the (very interesting) industry conversations around blockchain technology’s potential to resolve these issues in the future do not ease the clear and present challenges of dealing with the problem now.

The situation needs progressive, collaborative long-term thinking. But given the current blend of longstanding metadata mess; pre-IPO brinksmanship; and renewed tension between the publishing and label communities over streaming compensation, this issue remains potentially toxic for Spotify in particular.

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Music Ally's Head of Insight

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