The Mechanical Licensing Collective (MLC) has filed a lawsuit against Spotify over alleged underpaid royalties stemming from the streaming platform's subscription bundling practices.

The dispute centers on Spotify's March 2024 decision to classify its Premium Individual, Duo, and Family subscription plans as bundled offerings by including audiobook access. This reclassification allows Spotify to reduce its reported service provider revenue, resulting in lower royalty payments.

Key Points of the Lawsuit:

• Filed in the United States District Court for the Southern District of New York
• Seeks recovery of unpaid royalties under the compulsory mechanical blanket license
• Claims Spotify's bundled plans don't comply with applicable laws and regulations
• Requests corrected usage reporting and unpaid royalties from March 2024 onward

MLC CEO Kris Ahrend emphasizes the organization's statutory mandate to collect and distribute blanket license royalties and enforce payment obligations. Since January 2021, the MLC has distributed over $2 billion in royalties to songwriters and music publishers at no cost to them.

This legal action represents a significant challenge to Spotify's bundling strategy, which has reportedly saved the company $100 million in royalty payments since March 2024. The outcome of this case could have far-reaching implications for how streaming services structure their subscription offerings and calculate royalty payments.

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