Under a\u00a02022 legal settlement<\/a>\u00a0\u2013 aka Phonorecords IV \u2013 music publishers and music streaming services agreed that \u2018bundle\u2019 services in the States are permitted to pay a lower mechanical royalty rate to publishers and songwriters than standalone music subscription services.<\/p>\n The MLC argues that by applying the rate formula applicable to Bundles to its Premium subscriptions, Spotify is underpaying<\/em> royalties due to songwriters and publishers, and that Spotify\u2019s position does not comply with the law.<\/p>\n The MLC is the non-profit organization designated<\/a> by the US Copyright Office to ensure that music streaming services like Spotify pay the mechanical royalties they owe to songwriters and music publishers.<\/p>\n The org says in its lawsuit that “Spotify\u2019s 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”.<\/p>\n The MLC claims further in its lawsuit, which you can read in full here,<\/a> that “on March 1, 2024, 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”.<\/p>\n It argues that Spotify did so “by improperly characterizing 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”.<\/p>\n The MLC’s legal action against Spotify on Thursday arrived on the same day that the National Music Publishers Association issued a cease-and-desist letter to Spotify on behalf of NMPA members\u00a0for allegedly\u00a0hosting unlicensed lyrics on its platform.<\/p>\n As we noted in our prior report, licenses for lyrics would typically be granted by the NMPA\u2019s members, including prominent indie publishers plus the three major publishers\u00a0Sony Music Publishing,\u00a0Warner Chappell, and\u00a0Universal Music Publishing Group.<\/p>\n A Spotify spokesperson called the NMPA’s<\/a> letter \u201ca press stunt filled with false and misleading claims\u201d and suggested that the music publishers\u2019 legal threat over alleged infringement on its platform was \u201can attempt to deflect from the Phono IV deal that the NMPA agreed to and celebrated back in 2022\u201d.<\/p>\n SPOT’s spokesperson was, of course, referring to the backlash it has received from the songwriter and publisher community over the streaming platform\u2019s decision to reclassify its Premium tiers as \u2018bundles\u2019.<\/p>\n Speaking on the MBW Podcast on April 30, NMPA boss\u00a0David Israelite<\/a>\u00a0confirmed<\/a> that the situation would \u201clikely end up in a legal conflict.\u201d<\/p>\n “The financial consequences of Spotify\u2019s failure to meet its statutory obligations are enormous for Songwriters and Music Publishers.”<\/p>\n MLC lawsuit against Spotify\u00a0<\/span><\/p><\/blockquote>\n The situation has indeed ended up in legal conflict, with the MLC arguing in its lawsuit on Thursday that “the financial consequences of Spotify\u2019s failure to meet its statutory obligations are enormous for Songwriters and Music Publishers”.<\/p>\n The MLC also argues that “Premium is exactly the same service that Spotify offered to its subscribers before the launch of Audiobooks Access” and that “Nothing has been bundled with it”.<\/p>\n The complaint adds: “In the months before the purported transformation of Premium into a Bundled Subscription Offering, subscribers could listen to unlimited ad-free music and up to 15 hours of audiobooks each month in return for a $10.99 monthly payment, as well as other non-music audio content available on Spotify\u2019s platform, such as podcasts, comedy shows and spoken word performances.<\/p>\n “The launch of Audiobooks Access resulted in no change at all in Premium. And prior to March 1, Spotify paid mechanical royalties on the entirety of Premium revenues, subject to certain specific reductions identified in Section 115, despite the fact that Premium subscribers also had access to the same number of hours of audiobooks as Audiobooks Access subscribers now have.<\/p>\n “Nothing changed on the day Audiobooks Access launched: Premium subscribers continue to get the same single product, providing the same on-demand access to tens of millions of musical works”.<\/p>\n The MLC seeks corrected usage reporting and associated unpaid royalties for periods dating back to March 2024, along with an order requiring compliance going forward.<\/p>\n \u201cThe 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.\u201d<\/p>\n Kris Ahrend, The MLC<\/span><\/p><\/blockquote>\n The MLC\u2019s CEO Kris Ahrend, said: \u201cThe 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.<\/p>\n \u201cThe 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.\u201d<\/p>\n \u201cWe applaud the MLC for standing up for songwriters and not letting Spotify get away with its latest trick to underpay creators.”<\/p>\n David Israelite, the MLC<\/span><\/p><\/blockquote>\n Commenting on the MLC’s legal action against Spotify, NMPA President & CEO David Israelite, said: \u201cWe applaud the MLC for standing up for songwriters and not letting Spotify get away with its latest trick to underpay creators.<\/p>\n “The MLC is tasked with challenging services who falsely report royalties, and we commend their swift action.<\/p>\n \u201cThe lawsuit sends a clear message that platforms cannot improperly manipulate usage \u2013 in this case unilaterally redefining services as a bundle \u2013 in order to devalue music. We strongly support the MLC and will continue to pursue justice.\u201d<\/p>\n “The lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement.”<\/p>\n Spotify spokesperson\u00a0<\/span><\/p><\/blockquote>\n A Spotify spokesperson told us in a statement over email: “The lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement.”<\/p>\n They added: “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.<\/p>\n “We look forward to a swift resolution of this matter.”<\/p>\n\n","protected":false},"excerpt":{"rendered":" Lawsuit stems from Spotify’s decision at the beginning of March to reclassify its Premium tiers a bundles<\/p>\n","protected":false},"author":15,"featured_media":162804,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7],"tags":[2141,108],"class_list":["post-201825","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-nmpa","tag-spotify"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/posts\/201825","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/comments?post=201825"}],"version-history":[{"count":0,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/posts\/201825\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/media\/162804"}],"wp:attachment":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/media?parent=201825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/categories?post=201825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/tags?post=201825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![](\"https:\/\/www.musicbusinessworldwide.com\/files\/2021\/12\/Kris-Ahrend-Headshot-e1639080389819-80x45.jpg)
<\/figure>![\"David](\"https:\/\/www.musicbusinessworldwide.com\/files\/2020\/07\/Screen-Shot-2020-07-28-at-14.43.57-80x48.jpg "\\"David")
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