Spotify and MLC go head-to-head over royalty changes
The MLC are pursuing a lawsuit against Spotify following a change that affects the streamer’s payments to publishers.
Earlier in the month, it was revealed that Spotify will be paying less to publishers who pay songwriters. With the addition of audiobooks to their Premium platform, Spotify now qualify for a bundled rate which sees them pay less for mechanical royalties.
The Mechanical Licensing Collective (MLC), a non-profit designated by the US Copyright Office, is in charge of enforcing mechanical royalty payments owed to songwriters and music publishers. They have filed a lawsuit against Spotify for the changes to their payments to publishers.
The MLC claim that Spotify’s new bundle rate leads to them underpaying royalties to songwriters and publishers. They state that Spotify’s new position isn’t legal, writing: “Spotify’s assertion that Premium is now a Bundled Subscription Offering is directly at odds with the Section 115 regulations that the MLC has primary responsibility for interpreting and applying.”
They go on to say that Spotify is “improperly characterising the service as a different type of Subscription Offering and underpaying royalties, even though there has been no change to the Premium plan and no corresponding reduction to the revenues that Spotify generates from its tens of millions of Premium subscribers”.
Spotify have responded to the suit in comments to Digital Music News. They write: “The [MLC] lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement.” Phonorecords IV was a royalty agreement certified by the Copyright Royalty Board in 2022 that allows services to pay a lower mechanical royalty rate for bundled services.
Spotify add their boast that they “paid a record amount to to publishers and societies in 2023 and is on track to pay out an even larger amount in 2024”. Spotify are standing firm on the changes that apply to their Premium, Duo, and Family plans.
The MLC are unlikely to accept Spotify’s rebuttal as the lawsuit moves forward. They filed the suit the same day that the National Music Publishers Association (NMPA) released a cease-and-desist letter to Spotify on behalf of their members.
NMPA CEO, David Israelite said: “Spotify once again has gone to war with songwriters. In addition to Spotify’s improper use of the ‘bundle’ definition to lower its payments to songwriters and publishers, the platform appears to be rife with unlicensed musical works.”