Yahoo Finance Spotify Sued by Mechanical Licensing Collective Over Bundled Music-Audiobooks Subscription Plans, Which Result in Lower Royalties
The publishing industry’s offensive against Spotify continues as the Mechanical Licensing Collective has filed legal action against the streaming giant’s U.S. division over its recent subscription offers that bundle music and audiobooks, resulting in a lower royalty. the MLC seeks “unpaid royalties due under the compulsory mechanical blanket license obtained by Spotify to reproduce and distribute musical works in the United States via its consumer music streaming platform,” according to the announcement.
The lawsuit states that, beginning in March 2024, Spotify announced that its Premium Individual, Duo and Family subscription streaming plans would have an option to be bundled with audiobooks, reducing the royalties that creators will receive, although Spotify asserts that the increased volume of subscriptions would actually increase the amount of money distributed to music creators. The MLC says the new plans will result in an underpayment of royalties.
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The lawsuit states: “On March 1, 2024, without advance notice to the MLC, Spotify unilaterally and unlawfully decided to reduce the Service Provider Revenue reported to the MLC for Premium by almost 50 percent, by improperly characterizing the service as a different type of Subscription Offering and underpaying royalties, even though there has been no change to the Premium plan and no corresponding reduction to the revenues that Spotify generates from its tens of millions of Premium subscribers.”
“The MLC believes that Spotify’s position does not comply with applicable law and regulations,” the announcement reads, adding that the collective “has statutory authority to address Spotify’s noncompliance with its royalty payment obligations. The MLC is taking legal action to enforce these obligations and ensure that Spotify pays all royalties due from its use of songs on Premium plans.”
In response, a rep for Spotify sent the following statement: “The lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement. Bundles were a critical component of that settlement, and multiple DSPs include bundles as part of their mix of subscription offerings. Spotify paid a record amount to publishers and societies in 2023 and is on track to pay out an even larger amount in 2024. We look forward to a swift resolution of this matter.” The response is similar to Spotify’s response when the National Music Publishers Assn. criticized the plans last month.
Its CEO, Kris Ahrend, says, “The MLC was designated by the Register of Copyrights to administer the blanket license and is the only entity with the statutory mandate to collect and distribute blanket license royalties and take legal action to enforce royalty payment obligations. The MLC takes seriously its legal responsibility to take action on behalf of our Members when we believe usage reporting and royalty payments are materially incorrect.”
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