BREAKING: The MLC Sues Spotify

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The Mechanical Licensing Collective (The MLC) has taken legal action against Spotify in the United States District Court for the Southern District of New York. The action seeks recovery of 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.

The action states that, beginning in March 2024, Spotify asserted that its Premium Individual, Duo and Family subscription streaming plans were now Bundled Subscription Offerings because those plans included access to audiobooks. According to The MLC’s suit, applying the rate formula applicable to Bundled Subscription Offerings results in a reduction of the Service Provider Revenue that Spotify reports, which results in an underpayment of royalties.

The MLC believes that Spotify’s position does not comply with applicable law and regulations. The company 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.

“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,” says Kris Ahrend, The MLC CEO. “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.”

Click here to see a copy of the complaint.

In response to the legal action, NMPA President & CEO David Israelite shares, “We applaud The MLC for standing up for songwriters and not letting Spotify get away with its latest trick to underpay creators. The MLC is tasked with challenging services who falsely report royalties, and we commend their swift action.

“The lawsuit sends a clear message that platforms cannot improperly manipulate usage—in this case unilaterally redefining services as a bundle—in order to devalue music. We strongly support the MLC and will continue to pursue justice.”

NSAI Executive Director Bart Herbison shares, “The Nashville Songwriters Association International (NSAI) believes that the lawsuit the Mechanical Licensing Collective (MLC) filed against Spotify for underpaying mechanical royalties to songwriters is based on a correct interpretation of the streaming service eliminating standalone music subscriptions and only offering ‘bundles’ that pair music and books. Because bundles pay less to American songwriters, the loophole will result in Spotify reducing compensation to them by $150 million each year as founder Daniel Ek cashed in a reported $180 million in stocks over recent months—$118 million in proximity to the bundling move.”

He adds, “This scheme could set songwriters back to a situation worse than before the Copyright Royalty Board trial that resulted in a record percentage increase from streaming companies. Spotify’s history speaks for itself when it comes to failing to value the creators whose creations are the foundation of their product.”

In a statement, Spotify says, “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.”

This is a developing story.

LB Cantrell
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