Spotify Prevails in Lawsuit Over Reduced Songwriter Royalties in Bundled Subscriptions

Spotify has secured a legal victory in a lawsuit challenging its decision to lower royalty payments to songwriters through a bundling strategy introduced on its platform. The case, filed by the Mechanical Licensing Collective (MLC), centered around Spotify’s Premium subscription, which incorporated an audiobook bundle, leading to reduced royalty rates for music creators.
The dispute arose after Spotify leveraged a settlement reached with music publishers in 2022 through the Copyright Royalty Board (CRB). Under this agreement, streaming services are permitted to apply lower royalty rates when music subscriptions are bundled with other distinct services. Spotify argued that its Premium subscription, which now includes audiobooks, met the criteria outlined in the settlement.
In May, the MLC filed a lawsuit against Spotify, alleging that the company had misrepresented the nature of the bundle and had unilaterally slashed songwriter payments by as much as 50% without proper notice. The nonprofit organization, responsible for issuing mechanical licenses to digital streaming services, contended that Spotify’s actions were unlawful and unjustified.
However, on January 29, U.S. District Judge Analisa Torres dismissed the case, ruling in favor of Spotify. In the court’s memorandum, Judge Torres determined that Spotify’s bundling practice was legally permissible under the CRB guidelines. She stated:
“The only plausible application of the law supports Spotify’s position. Under the facts as alleged, audiobook streaming is a product or service that is distinct from music streaming and has more than token value. Premium is, therefore, properly categorized as a Bundle, and the allegations of the complaint do not plausibly suggest otherwise.”
Following the ruling, the MLC issued a statement reaffirming its concerns about Spotify’s practices:
“The MLC brought this action to address the unprecedented steps taken by Spotify to significantly underreport royalties to The MLC. We continue to be concerned that Spotify’s actions are not consistent with the law and that today’s decision does not align with the facts and legal principles central to this action. We are reviewing the decision and evaluating all available options, including our right to appeal.”
Spotify also responded to the decision, stating:
“We are pleased with this outcome, which demonstrates that, after careful review by the court, Spotify’s Premium service is appropriately categorized as a bundle and offers valuable content alongside music.”
While the ruling represents a significant legal win for Spotify, the MLC’s indication of a potential appeal suggests that the dispute over songwriter royalties in bundled streaming services may not be over yet. The case underscores the ongoing tensions between streaming platforms and rights holders over fair compensation in the evolving digital music landscape.
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