The Mechanical Licensing Collective (The MLC) has filed a lawsuit against Spotify in the United States, accusing it of underpaying songwriters and publishers royalties.
The lawsuit, filed on Thursday (May 16) in the U.S. District Court for the Southern District of New York, stems from Spotify’s decision in early March to reclassify its premium individual, dual and family subscription streaming plans as bundled subscription products as those plans now offer Audiobook access.
Under a 2022 legal settlement, also known as Phonorecords IV, music publishers and music streaming services agreed that U.S. “bundled” services could pay publishers and songwriters lower mechanical royalties than standalone music subscription services rates.
MLC believes that by applying the rate formula applicable to bundles to its premium subscriptions, Spotify pay less Spotify’s position is inconsistent with the law.
The MLC is a nonprofit organization designated by the U.S. Copyright Office to ensure that music streaming services like Spotify pay songwriters and music publishers the mechanical royalties they are owed.
“Spotify’s claim that Premium is now a bundled subscription product is in direct conflict with Article 115, which the MLC has primary responsibility for interpreting and applying,” the group said in the lawsuit.
MLC further claims in its lawsuit that “on March 1, 2024, without prior notice to MLC, Spotify unilaterally and unlawfully decided to reduce premium service provider revenue reported to MLC by nearly 50%.”
It argued that Spotify had done so by “inappropriately describing the service as a different type of subscription product and underpaying royalties, even though premium plans have not changed and Spotify’s revenue from tens of millions of users has not been correspondingly reduced.” Premium Subscriber”.
On Thursday, the MLC filed legal action against Spotify, the same day the National Music Publishers Association issued an order letter to Spotify on behalf of NMPA members for allegedly hosting unlicensed lyrics on its platform.
As we noted in previous reporting, lyric licenses are typically granted by NMPA members, including prominent independent publishers as well as the three major publishers Sony Music Publishing, Warner Chappell and Universal Music Publishing Group.
A Spotify spokesperson called the NMPA’s letter a “news stunt filled with false and misleading claims” and suggested the music publisher’s legal threats for alleged infringement on its platform were “an attempt to deviate from the Phono IV deal agreed to by the NMPA and celebrated in 2022”.
Of course, SPOT’s spokesperson was referring to the backlash from the songwriter and publisher community over the streaming platform’s decision to reclassify its premium version as a “bundle.”
Speaking on the MBW Podcast on April 30, NMPA Director David Israelite confirmed that the situation “could ultimately lead to a legal conflict.”
“Spotify’s failure to meet its legal obligations has had significant financial consequences for songwriters and music publishers.”
MLC files lawsuit against Spotify
The situation did end up in a legal conflict, with MLC arguing in Thursday’s lawsuit that “Spotify’s failure to meet its legal obligations has had significant financial consequences for songwriters and music publishers.”
MLC also argued that “Premium is the exact same service that Spotify offered to its subscribers prior to the launch of Audiobooks Access” and “nothing is bundled with it.”
The complaint adds: “In the months before Premium allegedly transitioned to a bundled subscription service, subscribers could listen to unlimited ad-free music and up to 15 hours of audiobooks per month for $10.99 per month, among other things. cost.
“The launch of Audiobooks Access does not result in any changes to Premium. Prior to March 1, Spotify paid mechanical royalties on all Premium revenue, subject to certain reductions identified in Section 115, although Premium subscribers also Get access to the same number of hours of audiobooks as Audiobooks Access subscribers now.
“Nothing changes on launch day for Audiobooks Access: Premium subscribers continue to receive the same single product, providing the same on-demand access to tens of millions of music titles.”
The MLC seeks correction of usage reports and related unpaid royalties from March 2024, as well as an order requiring future compliance.
“The MLC takes seriously its legal responsibility to act on behalf of our members when we believe there are material errors in usage reporting and royalty payments.”
Chris Arend, MLC
MLC chief executive Chris Ahrend said: “The MLC is appointed by the Register of Copyrights to administer blanket licenses and is the only entity with the statutory authority to collect and distribute blanket license royalties and take legal action to enforce license fee payment obligations.
“The MLC takes seriously its legal responsibility to act on behalf of our members when we believe there are material errors in usage reporting and royalty payments.”
“We applaud the MLC for standing up for songwriters and not letting Spotify get away with its latest ploy to underpay creators.”
David Israel, MLC
Commenting on the MLC’s legal action against Spotify, NMPA President and CEO David Israelite said: “We applaud the MLC for standing up for songwriters and not allowing Spotify to succeed in its latest tactic of underpaying creators.
“MLC is tasked with cracking down on service providers who falsely report royalties, and we applaud their swift action.
“This lawsuit sends a clear message that platforms cannot improperly manipulate usage—in this case unilaterally redefining services into bundled services—to devalue music. We strongly support MLC and will continue to pursue justice.
“The lawsuit involves terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement.”
Spotify spokesperson
“This lawsuit involves terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement,” a Spotify spokesperson told us in an emailed statement.
They added: “Bundles are a key component of the settlement, with multiple DSPs offering bundles as part of their subscription portfolios. Spotify paid record sums to publishers and societies in 2023 and expects to pay in 2024 More amount.
“We look forward to this matter being resolved as soon as possible.”
