The Mechanical Licensing Collective has secured a vital procedural ruling in its authorized battle with Spotify over streaming royalty funds.
On Thursday (September 25), the Federal District Court docket in New York issued an order granting The MLC’s request to file an amended criticism within the case.
The unique criticism, filed by the Mechanical Licensing Collective final Could, alleged that Spotify considerably underpaid royalties after its choice to report its Premium subscription streaming choices as bundles.
In her September 25 ruling, obtained by MBW, and which you’ll be able to learn in full right here, Choose Analisa Torres wrote that “MLC needs to be given at the very least one alternative to amend the criticism with the good thing about the Court docket’s reasoning within the Dismissal Order.”
The MLC should file its amended criticism by October 2, 2025.
The battle between the MLC and Spotify started in March 2024 when Spotify reclassified its Premium subscription tiers as “bundles,” as they now embody 15 hours of audiobook entry every month.
The transfer controversially resulted in Spotify paying a decrease mechanical royalty charge to publishers and songwriters in the US.
Right here’s a quick historical past explaining the context behind the transfer and the way it led to a authorized battle between the MLC and Spotify:
- It stemmed from a 2022 US Copyright Royalty Board ruling on statutory precepts referred to as “Phonorecords IV,” which established that bundled multimedia companies might pay a decrease mechanical royalty charge than standalone music subscription companies.
- SPOT subsequently added audiobooks to its Premium music service and claimed this certified as a “bundle,” permitting it to chop mechanical royalty funds to publishers and songwriters within the US.
- The transfer started affecting payouts in Spring 2024. The choice attracted authorized motion from the Mechanical Licensing Collective (MLC), which filed a lawsuit in opposition to Spotify in Could 2024, alleging the platform was illegally underpaying royalties to songwriters and publishers.
- The MLC’s lawsuit was dismissed in January 2025, with the court docket holding that the Premium Service is a bundle.
- The next month, the MLC sought to reopen the case and amend its criticism.
- Choose Torres has now dominated that the MLC ought to have the chance to take action.
‘The MLC welcomes this Order granting our movement to file an amended criticism and recognizing our proper to hunt restoration of underpaid royalties from Spotify,” the org advised MBW.
“This is a vital case. We introduced it to make sure streaming royalties are correctly paid beneath the legislation. We look ahead to additional demonstrating the benefit in our claims.”
The MLC
It added: “This is a vital case. We introduced it to make sure streaming royalties are correctly paid beneath the legislation. We look ahead to additional demonstrating the benefit in our claims.”
A Spokesperson for the US-based Nationwide Music Publishers Affiliation additionally commented on the court docket’s choice, noting that it arrives “on the heels of the historic $2.5 billion FTC settlement in opposition to Amazon, cracking down on its misleading subscription schemes”.
“The decide immediately upheld the MLC’s means to file a brand new criticism alleging Spotify improperly used the Audiobooks Entry plan and that Spotify really owes royalties on the Audiobooks Entry plan as a result of it comes with music.”
Spokesperson for the NMPA
Added the NMPA spokesperson: “We’re extraordinarily happy that the case in opposition to Spotify by the MLC has new momentum. The decide immediately upheld the MLC’s means to file a brand new criticism alleging Spotify improperly used the Audiobooks Entry plan and that Spotify really owes royalties on the Audiobooks Entry plan as a result of it comes with music.
“This implies songwriters and publishers have purpose to hope that Spotify’s misleading practices can be stopped. You can not unilaterally convert music subscribers to bundles together with audiobooks – to pay a decrease royalty charge – then increase costs and make it exceedingly tough to return to a music-only plan.”
In line with Thursday’s court docket submitting, the MLC desires to make two major amendments to its criticism, each stemming from new theories about how Spotify allegedly violates Part 115 of the Copyright Act:
1. Synthetic Value Manipulation: The MLC alleges that Spotify “created Audiobooks Entry and artificially inflated its value for this objective, by no means intending to noticeably market Audiobooks Entry as a ‘actual’ plan.”
In line with the submitting, Spotify launched the plan “solely in the US, and it did so with hardly any promoting” and used the $9.99 value to cut back “the pro-rata portion of Premium’s income that’s attributable to music streaming from one hundred pc (previous to March 2024) to as little as 37 p.c.”
2: Improper Reporting Classification The MLC contends that “Spotify has knowledgeable MLC that it combines the reporting and fee of royalties due in reference to Audiobooks Entry with the reporting and fee of royalties due in reference to Spotify Free,” which “contravenes the plain language of the relevant laws.”
The submitting argues this permits Spotify to keep away from greater “Bundled Subscription Providing” charges and as a substitute pay decrease charges without cost companies, thereby “sidestepping necessary royalty-calculation provisions beneath the Copyright Act.”
Spotify, in its most up-to-date Kind 6-Ok filed with the SEC final month for its Q2 monetary outcomes, identified that the MLC filed a request on April 1 to file an amended criticism alleging that the streaming firm “improperly valued the elements of the Premium Service bundle and improperly reported royalties for the Audiobook Entry Tier product”.
SPOT famous that “the MLC is entitled to attraction the unique choice after the decision of its new claims” and that, “if the MLC have been to attraction and in the end be solely profitable in its case, the extra royalties that might be due in relation to the interval March 1, 2024 to June 30, 2025 can be roughly €256 million, plus probably penalties and curiosity, which [SPOT] can not fairly estimate.”
That €256 million estimate works out to USD $290 million in keeping with the typical alternate charge for Q2 revealed by the European Central Financial institution.
MBW has reached out to Spotify for a remark in regards to the newest growth on this case.
All three majors have now inked direct publishing agreements with Spotify that transfer past the normal CRB mannequin within the US.
Spotify signed an settlement with Sony Music Publishing earlier this month that features a new direct licensing association within the US, which the streaming firm mentioned will, “ensur[e] songwriters share extra straight within the progress of streaming”.
Common Music Publishing Group and Warner Chappell Music signed direct licensing offers with Spotify in January and February.
Spotify additionally signed a direct licensing cope with Kobalt overlaying the US final month.Music Enterprise Worldwide
