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Business of Music: War of the royalties = Mechanical Licensing Collective (MLC) vs. Digital Media Organizations (DiMA) Spotify, Pandora, Apple, Amazon, Youtube, Feed FM, etc.)

The Mechanical Licensing Collective (the MLC) has filed a lawsuit against Spotify, calling the way the streamer reclassified its premium, duo and family plans as “bundles” and started paying a discounted royalty rate to publishers and songwriters “improper.”

“The financial consequences… are enormous for songwriters and music publishers,” the MLC writes in the complaint. >


News of the lawsuit arrives just a week after Billboard published its estimate that publishers and songwriters will earn about $150 million less in U.S. mechanicals in the next year, compared to what they would have been owed had the services not been bundled.


The root of the conflict started late last year when Spotify added 15 hours of free audiobook listening to Spotify premium, duo and family plans in the United States and other markets. At the time, this was a free extra for subscribers, and Spotify continued to pay the original full mechanical royalty rate for musical works in the United States.

Starting in March, however, Spotify quietly launched an audiobook-only plan, then started to reclassify its premium, duo and family plans as bundles because audiobooks were included.

According to Phonorecords IV, the agreement that dictates U.S. mechanical royalty rates for 2023-2027, bundles of multiple products are an inherently different type of subscription and thus use a different, lower royalty rate, given that multiple offerings must be paid for from the same subscription price.


In the lawsuit filed by the MLC, which processes and distributes mechanical royalties to publishers and songwriters in the United States, the organization argues “premium is exactly the same service” as it was previously.

“Prior to March 1, Spotify paid mechanical royalties on the entirety of Premium revenues, subject to certain specific reductions identified in Section 115, despite the fact that Premium subscribers also had access to the same number of hours of audiobooks as Audiobooks Access subscribers now have,” the lawsuit reads.

“On March 1, 2024, without advance notice to the MLC, Spotify unilaterally and unlawfully decided to reduce the Service Provider Revenue reported to the MLC for Premium by almost 50 percent,” reads the complaint. “[This was done] by improperly characterizing the service as a different type of subscription offering and underpaying royalties, even though there has been no change to the premium plan and no corresponding reduction to the revenues that Spotify generates from its tens of millions of Premium subscribers.”


Immediately, the National Music Publishers’ Association (NMPA) began speaking out against Spotify’s reclassification, calling it an “end to our period of relative peace” and “potentially unlawful.”

On Wednesday (May 15), the NMPA sent Spotify a cease and desist letter regarding a separate issue: allegedly unlicensed lyrics and video.


The MLC’s operational costs are paid for by Digital Media Organization (DiMA) members, including Spotify, Pandora, Apple Music, Amazon Music and more, as set forth by the Music Modernization Act (MMA). >

A few months ago, the MLC also sued Pandora, another streaming service it collects mechanical royalties from in the United States, for what it says is a failure to properly pay streaming royalties. That lawsuit is ongoing.


In a blog post in March, DiMA’s CEO/president, Graham Davies, pointed out that the MLC is “suing one of the licensees [Pandora] that pays its costs.”

The NMPA replied to this post by defending the MLC, saying that streamers “do not want what is in the best interests of music publishers or songwriters,” calling DiMA’s “new…strategy…an effort by the world’s largest digital companies to leverage their power to pay less.”

The NMPA’s president/CEO David Israelite provided a statement of support for the MLC lawsuit, saying, “we applaud the MLC for standing up for songwriters and not letting Spotify get away with its latest trick to underpay creators. The MLC is tasked with challenging services who falsely report royalties, and we commend their swift action. The lawsuit sends a clear message that platforms cannot improperly manipulate usage — in this case unilaterally redefining services as a bundle — in order to devalue music. We strongly support the MLC and will continue to pursue justice.”


The MLC and the Digital Licensee Coordinator (DLC) — the organization intended to represent the majority interests of digital music providers affected by the blanket license set up by the Music Modernization Act (MMA) — are also currently in the process of their first five-year check-up (called a “re-designation” process) to ensure both are effectively fulfilling their duties. This routine, five-year check, conducted by the U.S. Copyright Office, allows the two organizations to self-report on their progress and gives key stakeholders — including the Digital Media Organization (DiMA) — the opportunity to speak to the strengths and weaknesses of the organizations.


• SOURCE: The MLC Sues Spotify for Bundling, Cutting Royalties for Publishers and Songwriters; News of the suit comes a week after Billboard estimated that bundling would cause a loss of $150 million in royalties for songwriters in the next year. Billboard >


*VIDEO: Tiffany Red EXPOSES Beyoncé & The Music Industry For Mistreatment & Underpaying Songwriters & Artist. AT2 >


*RehaB101 Original New School Webcast > #RehaB101ONSW newsfeed.

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