Spotify has defeated a lawsuit from the Mechanical Licensing Collective that accused the streaming giant of unfairly cutting royalty rates as part of its audiobooks-music “bundling” option announced last year, according to Billboard. Although the MLC claimed that Spotify had “unilaterally and unlawfully” cut its music-royalty payments via the bundle, a federal judge ruled that its move was supported by “unambiguous” regulations.
In her decision on Wednesday, Judge Analisa Torres said that federal royalty rate rules clearly allowed Spotify to legally claim the lower rate. “Audiobook streaming is a product or service that is distinct from music streaming and has more than token value,” she wrote. “Premium is, therefore, properly categorized as a Bundle.” Billboard has estimated that Spotify’s “bundle” would result in the company paying roughly $150 million less over the next year.
Announced last May, Spotify has confirmed that its premium plans combining music and audiobooks will mean a lower mechanical royalty rate for songwriters on those plans, although it claims that earnings for creators will continue to rise.
“Spotify is on track to pay publishers and societies more in 2024 than in 2023,” it claimed at the time “As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers,” the statement reads. “Multiple DSPs have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent.” The final sentence is in reference to plans offered by Amazon — which offers its music streaming as part of its Prime service — Apple and others.
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While the move was loudly criticized by the music-publishing community and also brought about a legal complaint from the National Music Publishers Assn., last weekend Universal, the world’s largest music company, and Spotify announced a new, multi-tiered deal regarding recorded music and publishing that sources confirm to Variety that the deal improves at least some of the payment structure.
A Spotify rep said in a separate statement, “Spotify maintains its bundle, but with this direct deal [with UMPG], it has evolved to account for broader rights, including a different economic treatment for music and non-music content.”
In response to Wednesday’s ruling, a Spotify rep said: “We are 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. Bundle offerings play a critical role in expanding the interest in paying for music and growing the pie for the music industry. We know the regulations can be complex, but there’s plenty of room for collaboration—and our recent deal with UMPG shows how direct licenses can create flexibility and additional benefits.”
Reps for the MLC did not immediately respond to Variety’s request for comment.
From Variety US