We reported yesterday on the escalation of Spotify’s dispute with US publishing body the NMPA, initially triggered by the former’s new music+audiobooks bundle and its impact on mechanical royalties. Now another entity from the publishing sector has piled in: the Mechanical Licensing Collective (MLC).
The MLC isn’t just criticising Spotify: it has filed a legal action against the streaming service. It’s all about the bundles. In March, Spotify said that its individual, Duo and Family subscriptions were now bundles – because they include audiobooks – and thus qualified for different (lower) mechanical royalty rates.
“The MLC believes that Spotify’s position does not comply with applicable law and regulations,” said the Collective. Its legal filing (which you can read here) claims that on 1 March “without advance notice to the MLC, Spotify unilaterally and unlawfully decided to reduce the Service Provider Revenue reported to the MLC for Premium by almost 50 percent”.
The filing goes into much more detail about why the MLC believes Spotify’s new plans should not qualify as bundles, and lays out its belief that the streaming service’s launch of a standalone $9.99 audiobooks subscription isn’t a serious offering, but has “no more than ‘token value’ to Spotify… to support Spotify’s claim that Premium is now a Bundled Subscription Offering”.
(‘Token value’ being a key phrase from the relevant section of the US Copyright Act governing how this all works.)
The MLC wants Spotify to be forced to provide “corrected usage reporting and associated unpaid royalties” dating back to March 2024 as well as an order “requiring compliance going forward”. As you might imagine, Spotify does not agree.
“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,” said its spokesperson in a statement.
“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.”
That timescale prediction may be optimistic, given the heightened tensions within the US publishing community. And that’s where this dispute should perhaps be separated into two strands.
Bundles are a legitimate thing. Amazon has one, Apple has one. They’re written into the current mechanical rates settlement in the US because they’re a legitimate thing. Spotify’s move into audiobooks is also legitimate: a natural extension of its expansion beyond music. Audible has shown that audiobooks can be a decent business, so a bundle of music and audiobooks… well, it IS a bundle.
But that depends how you launch it, and judging by the MLC’s lawsuit, Spotify does have questions to answer about the way it’s gone about this process. Launching a standalone audiobooks subscription then not promoting it (the legal filing goes into detail on this too) can only fuel suspicion within the publishing community about the changes.
The accusation that publishers had no advance warning about Spotify reclassifying its premium subscriptions as bundles is also startling. That would be a strange way to treat partners, even within an aspect of the relationship that is governed by statutory rates. Spotify has the right to put its side of the story, of course, and we will report on that when it does.
Perhaps there will be a swift resolution to the MLC’s legal action. But the longer-term ramifications of all this are concerning. A happy, healthy relationship between Spotify and the publishing sector (and by extension its songwriters) is vital to both sides. That shouldn’t be an impossible dream, but right now it feels – yet again – a faraway prospect.