Music streaming service Spotify has succeeded in having a case against it dismissed.
A lawsuit was filed in the US in May 2024 by the MLC (Mechanical Licensing Collective), a body that collects payments from streaming services on behalf of songwriters, composers, lyricists and publishers.
The MLC alleged Spotify “used a legalistic word change — adding ‘bundled’ to the description of the service — to justify reducing the revenue on which royalties are based by almost 50 percent”, per Bloomberg.
“The group alleged that by calling the service an offering that includes both music streams and audiobooks, Spotify has ‘significantly reduced’ the royalties it pays.”
Billboard has estimated the loss in revenue for the music creators and industry at about US$150 million (A$242 million) in 2025.
Spotify said in a statement that the ruling shows the premium service “is appropriately categorised” and that “Bundle offerings play a critical role in expanding the interest in paying for music and growing the pie for the music industry”.
The ruling from US District Judge Analisa Torres on Wednesday [US time] got down into the legal weeds.
Spotify Audiobooks.
“One of the differences between Subscription Offerings and Bundled Subscription Offerings is the amount of revenue from licensed activity (e.g., music streaming) that digital service providers must report for the purposes of calculating royalties due,” Torres wrote.
“For Subscription Offerings, providers are required to report ‘all revenue’ they obtain from subscribers, subject to certain reductions. For Bundled Subscription Offerings, providers are required to report revenue based on the weight of the retail price of the individual component products or services of the Bundle if they were sold as standalone products or services, relative to the retail price of the Bundle.”
The judge gave an example to illustrate the point: “If a Subscription Offering is priced at $10 per month, the revenue the provider must report is $10 per month per subscriber, minus applicable reductions.
“By contrast, for a Bundled Subscription Offering consisting of the same Subscription Offering plus another product (e.g., a video streaming service), both of which, standing alone, would be priced at $10 per month but are now offered as a Bundle for $18 per month, the revenue that the digital music provider would be required to report for is only $9.
Judge Analisa Torres.
“Additional steps of the royalty formula further reduce the total royalties due for Bundled Subscription Offerings compared to standalone Subscription Offerings.”
And these reduced payments were at the heart of the matter for those representing the music side.
The judge found that a “‘Bundled Subscription Offering’ is a Subscription Offering that is included in a ‘Bundle’”.
“The Court finds [the law] and its implementing regulations are unambiguous, and that the only plausible application of the law supports Spotify’s position.”
Torres said “audiobook streaming is a product or service that is distinct from music streaming and has more than token value. Premium is, therefore, properly categorised as a Bundle, and the allegations of the complaint do not plausibly suggest otherwise”.
