Spotify Royalty Battle

Harmony in Dispute: The MLC vs. Spotify Royalty Battle

On Thursday, May 16, 2024, The Mechanical Licensing Collective (MLC) initiated legal proceedings against Spotify USA Inc. in an effort to recover unpaid royalties. This action stems from Spotify’s reclassification of its Premium Individual, Duo, and Family subscription streaming plans as Bundled Subscription Offerings, following the inclusion of audiobooks in these plans.

Background of the Dispute

The crux of the dispute lies in the rate formula applied to Bundled Subscription Offerings. Spotify’s reclassification has led to a significant reduction in the Service Provider Revenue reported by the company. Consequently, this has resulted in an underpayment of royalties to songwriters and publishers, which The MLC contends is a noncompliance with the current law and regulations.

The MLC’s Stance

The MLC maintains that Spotify’s position is unlawful and has taken legal action to enforce royalty payment obligations. As the sole entity authorized to enforce blanket license terms, The MLC’s legal responsibility is to act on behalf of its members when usage reporting and royalty payments are deemed incorrect.

Legal Proceedings and Implications

The lawsuit was filed in the United States District Court for the Southern District of New York. Spotify will be given the opportunity to respond to the allegations. The court will then establish a case schedule for the proceedings. The outcome of this legal action is expected to have significant implications for the music streaming industry, particularly in how subscription services are structured and how royalties are calculated and distributed.

Looking Ahead

The MLC’s legal efforts underscore the importance of fair compensation for music creators. The resolution of this case will likely set a precedent for future dealings between streaming platforms and licensing collectives. Members of The MLC and the broader music community await further developments and an explanation of the outcome, including details on any adjustments to royalties.

Amy H