Spotify Wins Lawsuit Over "Bundling" Strategy That Decreased Payments to Songwriters

Spotify has scored a legal victory that could have lasting consequences for how songwriters get paid in the streaming era. 

Spotify successfully fended off a lawsuit from the Mechanical Licensing Collective (MLC), which alleged that the company unlawfully slashed songwriter royalties by reclassifying its Premium subscriptions as "bundles" to include audiobooks. U.S. District Judge Analisa Torres reportedly ruled in favor of the streaming giant after determining its proprietors acted within the law when they adjusted the platform's payout structure.

The dispute began in early-2024, when Spotify began including 15 hours of audiobook access in its Premium plans. By labeling these subscriptions as "bundles," Spotify qualified for a lower mechanical royalty rate under Phonorecords IV, a 2022 settlement between music publishers and streaming services, per Music Business Worldwide.

The MLC, a nonprofit designated to administer digital mechanical royalties, took legal action in May, arguing that Spotify had "unilaterally and unlawfully" reduced payments to songwriters by as much as 50%.

Judge Torres rejected the MLC's claims, stating that Spotify’s interpretation of the law was the only "plausible" one. The decision could set a precedent for other streaming services looking to restructure their content offerings accordingly.

"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 said. "Premium is, therefore, properly categorized as a bundle, and the allegations of the complaint do not plausibly suggest otherwise."

Spotify welcomed the ruling, characterizing it a validation of its business model. The MLC, meanwhile, expressed deep concerns and indicated that an appeal may be on the table.