Aguirre added that “<\/b>these losses will continue if we can’t reverse or correct Spotify’s actions. In fact, if we don’t stop them, we are projected to lose over $3.1 billion<\/strong> through the next CRB period,” which will be Phonorecords V, which determines mechanical royalty rates for 2028 through 2032.<\/p>\n That first-year figure ($230m) cited by Aguirre roughly correlates with the\u00a0\u20ac205 million (<\/strong>$236m at current exchange rates) estimate published by Spotify<\/a> in an SEC filing in April for the value of additional royalties it would have to pay if the Mechanical Licensing Collective (MLC) “were to appeal and ultimately be entirely successful in its case\u201d.<\/p>\n The MLC sued Spotify in May last year over the streaming service\u2019s decision to reclassify its Premium subscriptions as \u201cbundles\u201d. The lawsuit was\u00a0dismissed<\/a>\u00a0in January, and the MLC asked the court in February to reconsider the dismissal.<\/p>\n According to Spotify\u2019s SEC filing from April, \u201cthe additional royalties that would be due in relation to the period March 1, 2024 to March 31, 2025 would be approximately \u20ac205 million<\/strong>, plus potentially penalties and interest,\u201d which the company says it \u201ccannot reasonably estimate\u201d.<\/p>\n Spotify revealed in that same SEC filing that, \u201con April 1, 2025, the MLC filed a request to file an amended complaint<\/strong>\u00a0alleging that Spotify USA Inc. improperly valued the components of the Premium Service bundle and improperly reported royalties for the Audiobook\u00a0Access\u00a0Tier product\u201d.<\/p>\n Aguirre warned on Wednesday that the CRB’s Phonorecords V proceeding is “fast approaching” and “will determine mechanical royalty rates for 2028 through 2032, a five-year period”.<\/p>\n The exec added: “We must make sure that digital companies cannot continue to use compulsory licenses to push down our royalty rates. One of the biggest challenges continues to come from Spotify’s mischaracterization of its music service into bundles, which forced the conversion of over 44 million subscribers into bundle platforms that those subscribers did not request.<\/p>\n \u201cThis negatively impacted mechanical royalty payments by attempting to exploit a loophole in the Section 115 <\/b>regulations.\u201d<\/p>\n The \u2018Section 115\u2019 rules cited by Aguirre refer to the compulsory license in the US, also known as the 115 License<\/a> (because it is stipulated under section 115 of the Copyright Act<\/b>), which allows eligible digital services to use copyrighted music for a set fee without having to negotiate directly with rightsholders.<\/p>\n In March 2024, Spotify reclassified<\/a> its Premium subscription tiers as \u201cbundles,\u201d as they now include 15 hours of audiobook access <\/a>each month.<\/p>\n The reclassification is significant because under a 2022 legal settlement called Phonorecords IV<\/b><\/a>, music publishers and music streaming services agreed that \u2018bundle\u2019 services in the United States are permitted to pay a lower mechanical royalty rate to publishers and songwriters than standalone music subscription services.<\/p>\n
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