Spotify has come out victorious in a lawsuit filed against the company last year over a controversial bundling strategy it adopted that led to decreased royalty payments to songwriters.
A federal judge dismissed the suit Wednesday, a significant win in a dispute between Spotify and much of the music publishing industry that began last year when Spotify introduced a new audiobooks bundle to its premium subscription. With that bundle, Spotify started to pay a lesser royalty rate to songwriters, maintaining such a move was backed by a settlement they’d reached with music publishers in 2022 through the Copyright Royalty Board that determined streaming services are allowed to pay less on music subscriptions bundled with other services.
The Mechanical Licensing Collective, the nonprofit responsible for issuing mechanical licenses to streaming services, sued Spotify last May, claiming that the service had incorrectly characterized the bundle and “unilaterally and unlawfully” began reducing the rate by as much as 50 percent without any warning.
In a memorandum filed Wednesday, the court determined that Spotify was within its rights, calling the bundling rule “unambiguous.”
“The only plausible application of the law supports Spotify’s position,” judge Analisa Torres wrote. “Under the facts as alleged, audiobook streaming is a product or service that is distinct from music streaming and has more than token value. Premium is, therefore, properly categorized as a Bundle, and the allegations of the complaint do not plausibly suggest otherwise.”
The dispute became one of the more heated battles in the music industry last year, with advocates criticizing the practice for diminishing the value of songwriters, who’ve already been considerably struggling to make money in the streaming era.
“The MLC brought this action to address the unprecedented steps taken by Spotify to significantly underreport royalties to The MLC,” the MLC said in a statement. “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.”
In a statement to Rolling Stone, a spokesperson for Spotify said the company was “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.”
The suit’s dismissal comes days after Spotify entered a new agreement with Universal Music Group and its publishing arm UMPG. Earlier this week, David Israelite, the CEO of the trade group the National Music Publishers’ Association, called the new deal “a clear sign that Spotify felt the backlash to its bundling scheme.”
Spotify referenced that new deal in its statement on the dismissal Wednesday. “We know the regulations can be complex, but there’s plenty of room for collaboration,” the company said.
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