Spotify wins ‘bundling’ lawsuit over controversy that lowered artist payments

Spotify has won a lawsuit over a bundling strategy it adopted which led to decreased royalty payments to songwriters.

It comes after the streaming company introduced a new audiobooks bundle to its premium subscription last year.

Spotify started to pay a lesser royalty rate to songwriters, and argued that the move was backed by a settlement they had reached with music publishers in 2022 through the Copyright Royalty Board, which determined streaming services are allowed to pay less on music subscriptions bundled with other services.

The Mechanical Licensing Collective, a nonprofit organisation responsible for issuing mechanical licences to streaming services, filed a lawsuit against Spotify last May, claiming that it had incorrectly characterised the bundle and “unilaterally and unlawfully” began reducing the rate by as much as 50 percent without any warning, according to Rolling Stone.

In a memorandum filed in court yesterday (January 29), it was ruled that Spotify was within its rights, calling the bundling rule “unambiguous.”

Judge Analisa Torres added: “The only plausible application of the law supports Spotify’s position. 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 categorised as a bundle, and the allegations of the complaint do not plausibly suggest otherwise.”

Following the ruling the MLC issued a statement (via Rolling Stone).

It said: “The MLC brought this action to address the unprecedented steps taken by Spotify to significantly underreport royalties to The MLC. 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.”

Spotify also said the company was “pleased with this outcome, which demonstrates that, after careful review by the court, Spotify’s Premium service is appropriately categorised as a bundle and offers valuable content alongside music.”

The ruling comes just days after Universal Music Group (UMG) and Spotify announced a new multi-year deal.

Spotify has been heavily criticised in recent months most recently after hosting a brunch one day before Donald Trump’s inauguration and donating $150,000 (£122,000) to the official ceremony.

Earlier this month, Björk also said that she thinks Spotify is “probably the worst thing that has happened to musicians”. This wasn’t the first time that Björk has shared her thoughts on the streaming platform. Back in 2015, she also opened up about her decision not to release her album ‘Vulnicura’ on Spotify out of “respect” principles.

“It just seems insane,” she said at the time. “To work on something for two or three years and then just, ‘Oh, here it is for free’. It’s not about the money; it’s about respect. Respect for the craft and the amount of work you put into it.”

Her comments echoed those of Anthrax drummer Charlie Benante in November, when he described streaming as the place “where music goes to die”.

“Subconsciously this may be the reason why we don’t make records every three years or whatever, because I don’t want to give it away for free,” he said. “It is basically stealing. It is stealing from the artist – the people who run music streaming sites like Spotify. I don’t subscribe to Spotify. I think it is where music goes to die.”

Spotify CEO Daniel Ek also previously sparked backlash for his comments relating to the cost of “creating content”, with countless users and musicians describing him as “out of touch”.

In part, the backlash related to reports that Spotify had made profits of over €1billion (£860m), following staff being laid off and subscription prices rising. It also came as Spotify officially demonetised all songs on the platform with less than 1,000 streams – making it harder for artists to generate royalties from their music and restricting new artists looking to crack the music industry.

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