Spotify Wins MLC Lawsuit Over Bundling Royalties

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Spotify has won a legal battle against The Mechanical Licensing Collective (MLC), with a federal judge ruling in favor of the streaming giant’s revised royalty structure.

The MLC filed a lawsuit last year, accusing Spotify of unlawfully cutting its royalty payments nearly in half by bundling audiobooks with its premium subscription service.

In a decision issued Wednesday (Jan. 31), Judge Analisa Torres ruled that Spotify’s approach was permitted under federal regulations, stating that audiobook streaming constitutes a distinct product with more than “token value,” according to a report from Billboard.

“MLC cannot plausibly claim that having access to audiobooks is not something of intrinsic and monetary value to many, even if only a fraction of Spotify’s millions of Premium subscribers may take advantage of it,” the judge wrote. “The court can draw only one conclusion: that 15 hours of monthly audiobook streaming is a product or service that has more than token value.”

The ruling solidifies Spotify’s ability to pay a lower “bundled” rate under federal royalty guidelines, rejecting MLC’s argument that the company’s offering did not constitute a true bundle.

“We are extremely disappointed in the ruling,” Nashville Songwriters Association International’s (NSAI) Executive Director Bart Herbison shared on Wednesday. “Following ten years of Copyright Royalty Board (CRB) proceedings with the National Music Publishers Association (NMPA) where we won historic mechanical royalty rate increases, Spotify came up with a bundling scheme resulting in hundreds of millions in reduced payments to American songwriters. The Mechanical Licensing Collective (MLC) filed a lawsuit in response. This news is a gut punch.

“NSAI is considering our next steps in our ongoing fight for fair compensation. We hope that deals such as the one just announced between Universal Music Group and Spotify, and recent direct agreements between Amazon and music publishers, will be beneficial in future Copyright Royalty Board proceedings where the streaming mechanical royalty rates for songwriters are set.”

LB Cantrell
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