The Mechanical Licensing Collective has secured a crucial procedural ruling in its legal battle with Spotify over streaming royalty payments.
On Thursday (September 25), the Federal District Court in New York issued an order granting The MLC’s request to file an amended complaint in the case.
The original complaint, filed by the Mechanical Licensing Collective last May, alleged that Spotify significantly underpaid royalties after its decision to report its Premium subscription streaming offerings as bundles.
In her September 25 ruling, obtained by MBW, and which you can read in full here, Judge Analisa Torres wrote that “MLC should be given at least one opportunity to amend the complaint with the benefit of the Court’s reasoning in the Dismissal Order.”
The MLC must file its amended complaint by October 2, 2025.
The conflict between the MLC and Spotify began in March 2024 when Spotify reclassified its Premium subscription tiers as “bundles,” as they now include 15 hours of audiobook access each month.
The move controversially resulted in Spotify paying a lower mechanical royalty rate to publishers and songwriters in the United States.
Here’s a brief history explaining the context behind the move and how it led to a legal fight between the MLC and Spotify:
- It stemmed from a 2022 US Copyright Royalty Board ruling on statutory precepts called “Phonorecords IV,” which established that bundled multimedia services could pay a lower mechanical royalty rate than standalone music subscription services.
- SPOT subsequently added audiobooks to its Premium music service and claimed this qualified as a “bundle,” allowing it to cut mechanical royalty payments to publishers and songwriters in the US.
- The move began affecting payouts in Spring 2024. The decision attracted legal action from the Mechanical Licensing Collective (MLC), which filed a lawsuit against Spotify in May 2024, alleging the platform was illegally underpaying royalties to songwriters and publishers.
- The MLC’s lawsuit was dismissed in January 2025, with the court holding that the Premium Service is a bundle.
- The following month, the MLC sought to reopen the case and amend its complaint.
- Judge Torres has now ruled that the MLC should have the opportunity to do so.
‘The MLC welcomes this Order granting our motion to file an amended complaint and recognizing our right to seek recovery of underpaid royalties from Spotify,” the org told MBW.
“This is an important case. We brought it to ensure streaming royalties are properly paid under the law. We look forward to further demonstrating the merit in our claims.”
The MLC
It added: “This is an important case. We brought it to ensure streaming royalties are properly paid under the law. We look forward to further demonstrating the merit in our claims.”
A Spokesperson for the US-based National Music Publishers Association also commented on the court’s decision, noting that it arrives “on the heels of the historic $2.5 billion FTC settlement against Amazon, cracking down on its deceptive subscription schemes”.
“The judge today upheld the MLC’s ability to file a new complaint alleging Spotify improperly used the Audiobooks Access plan and that Spotify actually owes royalties on the Audiobooks Access plan because it comes with music.”
Spokesperson for the NMPA
Added the NMPA spokesperson: “We are extremely pleased that the case against Spotify by the MLC has new momentum. The judge today upheld the MLC’s ability to file a new complaint alleging Spotify improperly used the Audiobooks Access plan and that Spotify actually owes royalties on the Audiobooks Access plan because it comes with music.
“This means songwriters and publishers have reason to hope that Spotify’s deceptive practices will be stopped. You cannot unilaterally convert music subscribers to bundles including audiobooks – to pay a lower royalty rate – then raise prices and make it exceedingly difficult to return to a music-only plan.”
According to Thursday’s court filing, the MLC wants to make two main amendments to its complaint, both stemming from new theories about how Spotify allegedly violates Section 115 of the Copyright Act:
1. Artificial Price Manipulation: The MLC alleges that Spotify “created Audiobooks Access and artificially inflated its price for this purpose, never intending to seriously market Audiobooks Access as a ‘real’ plan.”
According to the filing, Spotify launched the plan “only in the United States, and it did so with hardly any advertising” and used the $9.99 price to reduce “the pro-rata portion of Premium’s revenue that is attributable to music streaming from 100 percent (prior to March 2024) to as little as 37 percent.”
2: Improper Reporting Classification The MLC contends that “Spotify has informed MLC that it combines the reporting and payment of royalties due in connection with Audiobooks Access with the reporting and payment of royalties due in connection with Spotify Free,” which “contravenes the plain language of the applicable regulations.”
The filing argues this allows Spotify to avoid higher “Bundled Subscription Offering” rates and instead pay lower rates for free services, thereby “sidestepping important royalty-calculation provisions under the Copyright Act.”
Spotify, in its most recent Form 6-K filed with the SEC last month for its Q2 financial results, pointed out that the MLC filed a request on April 1 to file an amended complaint alleging that the streaming company “improperly valued the components of the Premium Service bundle and improperly reported royalties for the Audiobook Access Tier product”.
SPOT noted that “the MLC is entitled to appeal the original decision after the resolution of its new claims” and that, “if the MLC were to appeal and ultimately be 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, plus potentially penalties and interest, which [SPOT] cannot reasonably estimate.”
That €256 million estimate works out to USD $290 million according to the average exchange rate for Q2 published by the European Central Bank.
MBW has reached out to Spotify for a comment about the latest development in this case.
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”.
Universal Music Publishing Group and Warner Chappell Music signed direct licensing deals with Spotify in January and February.
Spotify also signed a direct licensing deal with Kobalt covering the US last month.Music Business Worldwide
