In early March, Spotify reclassified its Premium individual, Duo and Family subscription streaming plans into bundles, as these plans now offer access to audiobooks.
move Spotify controversially pays lower mechanical royalty rates to publishers and songwriters in the US.
That’s because, under a 2022 legal settlement known as Phonorecords IV, music publishers and music streaming services agreed that U.S. “bundles” could pay publishers and songwriters less than standalone music subscription services of mechanical royalty rates.
The Mechanical Licensing Collective (MLC) is a nonprofit organization designated by the U.S. Copyright Office to administer blanket compulsory licenses and ensure that music streaming services like Spotify pay songwriters and music publishers the mechanical royalties they are owed.
On May 16, MLC sued Spotify in the United States, claiming that it decided to reclassify its premium version as a “bundle,” thus underpaying songwriters and publishers royalties.
One of the big questions about the dispute is what Spotify’s alleged underreporting of royalties means. dollar terms For songwriters and publishers.
No specific numbers were given in the lawsuit, but the MLC said Spotify’s “unilateral and unlawful decision to reduce premium service provider revenue reported to the MLC by nearly 50% Misrepresenting the service as a different type of subscription product and underpaying royalties.”
Now Spotify has given its own estimate.
Spotify announced its second-quarter results on Tuesday (July 23) and submitted a formal Form 6-K regulatory report to the U.S. Securities and Exchange Commission the next day (July 24).
In the “Contingencies” section of the filing, Spotify noted that “various legal actions, proceedings and claims are pending, or may be filed or asserted” against the company.
Of course, MLC filed one such claim against Spotify in May, which the company mentioned in its SEC filing.
According to Spotify: “If MLC is fully successful in this case, the additional royalties payable between March 1, 2024 and June 30, 2024 will be approximately 46 million eurosof which approximately 35 million euros Relates to the three months ending June 30, 2024, plus potential penalties and interest that we cannot reasonably estimate.
Spotify added: “We intend to vigorously defend this lawsuit.”
That 46 million euros The numbers quoted by Spotify convert to Dollar US$49.52 million Calculated based on the average quarterly exchange rate published by the European Central Bank.
this 35 million euros [in royalties alone] The three months ended June 30, 2024 (i.e. the second quarter of 2024) converted to $37.68 million.
As Music Ally points out, if Spotify paid approx. US$37.68 million (35 million euros) Due to the reduction in mechanical royalties per quarter following the March bundling change, SPOT’s mechanical royalty payments will be reduced by approximately $150 million in the year following the change, which is in line with estimates reported by Billboard in May.global music business
