The Mechanical Licensing Collective (MLC) has filed a lawsuit against Spotify over alleged royalty underpayments related to bundle reclassification. The dispute centers on Spotify's decision to reclassify its standard $10.99 monthly subscription plans as bundles.

Key Points of Controversy:

• Spotify introduced a $9.99 audiobook-only plan, then reclassified its main subscription tiers as bundles
• Under Phonorecords IV, bundle rates are 24.5% of "total content cost" versus 26.2% for music-only plans
• This reclassification could result in an estimated $150 million annual decrease in mechanical royalty payments

MLC's Main Arguments:

1. Premium Is Not a Bundle

• The service remains unchanged from before audiobook launch
• No new features were actually bundled
• Service components remained identical

2. Technical Arguments

• Bundles must include at least two distinct products/services
• The audiobook-only plan offers the same features as Premium
• Premium's audiobook component lacks sufficient "token value" to qualify as a bundle

MLC's Requested Relief:

• Declaration that Spotify's bundle classification violates Section 115
• Compensatory damages for underpaid royalties
• Late fees and attorneys' fees
• Preliminary injunction against mischaracterification

This legal battle highlights growing tensions between music rights holders and streaming platforms over royalty payments and service classification. Spotify has denied these claims and is actively contesting the lawsuit.

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