MBW Explains is a series of analytical features in which we explore the context behind major music industry talking points – and suggest what might happen next. Only MBW+ subscribers have unlimited access to these articles. MBW Explains is supported by Reservoir.
The Mechanical Licensing Collective’s legal battle with Spotify over audiobook bundling and royalty payments has entered a new phase following a series of October court filings.
The dispute traces back to March 2024, when Spotify reclassified its Premium subscription tiers as “bundles” after adding 15 hours of monthly audiobook access to these plans.
Under the 2022 Phonorecords IV settlement, an agreement between music publishers and streaming services that governs mechanical royalty rates through 2027, bundled multimedia services are permitted to pay lower mechanical royalty rates than standalone music subscriptions.
The MLC, designated by the US Copyright Office to administer the blanket compulsory mechanical license, filed suit in May 2024, alleging the platform was illegally underpaying royalties to songwriters and publishers.
In January 2025, Judge Analisa Torres dismissed the lawsuit with prejudice. Torres ruled that “audiobook streaming is a product or service that is distinct from music streaming and has more than token value” and that “Premium is, therefore, properly categorized as a Bundle.”
Last month, Judge Torres granted the MLC permission to file an amended complaint.
Here are three recent developments you might have missed:
1. THE MLC FILED AN AMENDED COMPLAINT ON OCTOBER 1, FOCUSING ON SPOTIFY’S MARKETING AND PRICING OF AUDIOBOOKS ACCESS
Following the September 25 court order that allowed the case to proceed with modified claims, The MLC filed its amended complaint on October 1, meeting the October 2 deadline set by Judge Torres.
The 48-page filing, which you can read in full here, presents arguments that Spotify’s bundling strategy violated regulatory requirements. The complaint makes two key amendments to the MLC’s original case.
First, the MLC challenges how Spotify valued and marketed Audiobooks Access, the $9.99 standalone subscription that serves as the basis for Spotify’s bundling calculation.
In the filing, the MLC contrasts how Spotify marketed Audiobooks Access versus how it announced the addition of audiobooks to Premium.
“Spotify, a sophisticated marketer that had grown Premium into the largest music streaming service in the world, launched Audiobooks Access with effectively no marketing,” the complaint states. The filing notes that Spotify’s announcement of audiobooks in Premium was a “highly publicized announcement” that featured comments from senior executives, including founder Daniel Ek.
According to the filing, “upon information and belief, the principal marketing for Audiobooks Access at launch consisted of a single 150-word press release that Spotify issued on March 1, 2024.” The MLC alleges that for months after launch, Spotify’s homepage listing subscription plans didn’t even mention Audiobooks Access, and the plan “could [only] be found by searching for words such as ‘Spotify’ and ‘Audiobooks Access’ on Google or a similar search engine.”
The MLC alleges that “Spotify has improperly used the price of Audiobooks Access as the value of the audiobooks component when calculating Service Provider Revenue for Spotify’s Premium tiers, which artificially inflated the value of the audiobooks component and, in turn, improperly reduced the amount of royalties paid for the music component of Premium.”
The complaint states that Audiobooks Access was “launched only in the United States,” despite Spotify providing audiobooks in nine other countries, but only to Premium subscribers, never as a standalone offering.
Second, the MLC argues that Audiobooks Access itself should be classified as a bundle. “Further, if Premium is properly characterized as a Bundle of music and audiobooks components, as the Court has previously concluded, then so too is Audiobooks Access, meaning that Spotify must report and pay royalties for Audiobooks Access as a Bundled Subscription Offering,” the filing states.
The complaint emphasizes: “There can be no dispute that Audiobooks Access is not a ‘standalone’ audiobooks offering. Spotify has repeatedly acknowledged throughout this litigation that Audiobooks Access provides its subscribers with music.”
The MLC contends that Spotify improperly combines reporting and payment of royalties for Audiobooks Access with Spotify Free, which “contravenes the plain language of the applicable regulations,” allowing Spotify to pay lower free-service rates instead of higher bundled subscription rates, thereby “sidestepping important royalty-calculation provisions under the Copyright Act.”
Tingey Law Firm via Unsplash
2. THE MLC DEMANDED A JURY TRIAL ON OCTOBER 8
Just over a week after filing its amended complaint, The MLC formally demanded a jury trial in the case on October 8, via a filing that can be read here.
The decision to request a jury trial marks a strategic shift for the MLC.
The jury demand puts factual questions before a jury rather than leaving them to a judge’s legal interpretation; specifically, how Spotify designed and priced Audiobooks Access, and whether it properly reported royalties for the service.
According to court filings, a case management conference is scheduled for November 3, with attorneys expected to file a proposed discovery schedule in advance of that proceeding.
The MLC’s path to a jury trial represents a significant pivot from its original legal strategy. When Judge Torres dismissed the initial complaint in January, she ruled that “audiobook streaming is a product or service that is distinct from music streaming and has more than token value” and that “Premium is, therefore, properly categorized as a Bundle.”
Rather than appeal that ruling directly, the MLC obtained permission to file an amended complaint focusing on different arguments: that Spotify artificially manipulated Audiobooks Access pricing and improperly classified the tier for royalty reporting purposes. These claims center on Spotify’s business decisions and practices, questions the MLC appears to believe are better suited for jury evaluation than legal interpretation alone.
Credit: miss.cabul / Shutterstock.com
3. SPOTIFY FILED its response ON OCTOBER 24, CHALLENGING THE MLC’S NEW CLAIMS
On Friday (October 24), Spotify filed its 35-page response to the MLC’s amended complaint through its legal team at Latham & Watkins, led by partner Allison L. Stillman. The document addresses both of the MLC’s theories while arguing that the claims lack factual support. You can read the filing in full here.
Spotify’s response notes the procedural history, admitting that “in October 2023, it announced that Premium subscribers would gain access to 15 hours of monthly audiobook streaming” and that “Premium subscribers began receiving this benefit in November 2023.” The filing characterizes the new claims as “two peripheral issues…both of which are unsupportable by the facts.”
Spotify’s response defends its $9.99 audiobook valuation with a comparative market analysis. The response also states that competing audiobook services “offering similar access to bestsellers cost at least $9.99 monthly, with most priced higher.”
Spotify provides specific pricing comparisons:
Audible Premium Plus: $14.95 per month
Barnes & Noble audiobook subscription: $14.99 per month
Kobo Plus (Read & Listen): $9.99 per month
Regarding the cheapest service the MLC cited, Spotify’s filing states: “The least expensive of the audiobook services cited by MLC in its Amended Complaint, Amazon‘s Audible Plus, is $7.95, and it gives access to virtually no bestsellers.”
The filing continues: “Furthermore, no other subscription audiobook service in the U.S. of which Spotify is aware costs less than $7.95 per month. What this means is that the least that the audiobook component of Spotify Premium could conceivably be valued at, consistent with the law, is $7.95 per month.”
Spotify then addresses even this lower price point: “even if Spotify were to use $7.95 as the standalone price in the Bundle calculation (which it should not), the result would be an extremely small percentage increase in royalties paid to the MLC.”
On the Audiobooks Access classification. Spotify argues the MLC’s second claim fails on a technical basis. “The music component of Audiobooks Access is Spotify Free, which is a nonsubscription music offering that is given free to any consumer,” the filing states. “Therefore, there is no plausible argument that ‘Audiobook[s] Access’ could in fact be a ‘Bundle’ under the existing regulations.”
The filing emphasizes that even if the MLC’s theory had merit, “the royalties at stake with respect to this issue, even if they could be properly calculated, would be miniscule—a drop in comparison to the ocean of royalties Spotify pays to the MLC.”
Spotify’s response addresses the financial implications of the MLC’s claims. “Ultimately, despite public statements by MLC and publisher representatives to the contrary, MLC’s remaining claims would not result in any dramatic increase in royalty payments to songwriters and publishers,” the filing continues.
The filing adds: “All of this raises serious questions about MLC’s motivations in continuing to spend resources on this litigation.”
Spotify requested dismissal of all claims with prejudice and reimbursement of legal fees.
The company noted in a regulatory filing in August that if the MLC were “entirely successful in its case, the additional royalties that would be due in relation to the period March 1, 2024, to June 30, 2025, would be approximately €256 million” (roughly $290 million), plus potentially penalties and interest.
All three majors have now inked direct publishing agreements with Spotify that move beyond the traditional CRB model in the US.
Spotify signed an agreement with Sony Music Publishing earlier this month that includes a new direct licensing arrangement in the US, which the streaming company said will, “ensur[e] songwriters share more directly in the growth of streaming”.
Spotify also signed a direct licensing deal with Kobalt covering the US last month.
MBW Explains is a series of analytical features in which we explore the context behind major music industry talking points – and suggest what might happen next. Only MBW+ subscribers have unlimited access to these articles. MBW Explains is supported by Reservoir.Music Business Worldwide
