NEW YORK (CelebrityAccess) — Spotify prevailed in a lawsuit brought by the Mechanical Licensing Collective (MLC), accusing the on-demand streaming platform of underpaying songwriters royalties on millions of works.
On Wednesday, U.S. District Judge Analisa Torres rejected the MLC’s complaint, which claimed that Spotify had failed to accurately pay royalties owed to songwriters by claiming that it’s premium subscription, which includes audiobooks as well as music, was a “bundled subscription” allowing it to pay reduced royalties.
The MLC sought to force Spotify to pay music royalties for premium users as if the subscription was a standlone “subscription offering,” according to the complaint filed in New York’s Southern District.
However, Judge Torres on Wednesday rejected the MLC’s argument, noting in her ruling that Spotify offers more than a mere “token value” through audiobooks to its subscribers.
The ruling also found that the MLC’s definition of a bundle encompased Spotify’s premium subscription offering.
“Under the facts as alleged, audiobook streaming is a product or service that is distinct from music streaming and has more than token value,” Torres wrote in her ruling. “Premium is, therefore, properly categorized as a Bundle, and the allegations of the complaint do not plausibly suggest otherwise.”
According to a Billboard report, cited by the MLC’s complaint, Spotify’s bundling strategy could cost songwriters as much as $150 million in the next year.
A rep for Spotify said: “We are pleased with this outcome, which demonstrates that, after careful review by the court, Spotify’s Premium service is appropriately categorized as a bundle and offers valuable content alongside music. Bundle offerings play a critical role in expanding the interest in paying for music and growing the pie for the music industry. We know the regulations can be complex, but there’s plenty of room for collaboration—and our recent deal with UMPG shows how direct licenses can create flexibility and additional benefits.”
A spokesperson for the MLC commented: “The MLC acknowledges today’s decision by Judge Torres of the U.S. District Court for the Southern District of New York in our legal action against Spotify. The MLC brought this action to address the unprecedented steps taken by Spotify to significantly underreport royalties to The MLC. Congress authorized The MLC to take legal actions in situations like this, to enforce the payment obligations of digital services under the compulsory blanket license that The MLC administers. We continue to be concerned that Spotify’s actions are not consistent with the law, and that today’s decision does not align with the facts and legal principles central to this action. We are reviewing the decision and evaluating all available options, including our right to appeal.”
