Music streaming titan Spotify is facing legal action in a US federal court over accusations of underpaying songwriters, composers, and publishers to the tune of tens of millions of dollars.
The lawsuit against Spotify USA was lodged in New York on Thursday by the Mechanical Licensing Collective (MLC), a nonprofit entity tasked with gathering and distributing owed royalties from music streaming platforms.
The complaint contends that on March 1, Spotify abruptly altered the classification of its paid subscription services, resulting in a nearly 50 percent reduction in royalty payments to MLC, catching the collective off guard.
“The financial implications of Spotify’s failure to uphold its statutory obligations are significant for songwriters and music publishers,” stated MLC, warning of potentially hundreds of millions of dollars in losses if the streaming giant’s alleged underreporting goes unaddressed.
According to MLC, Spotify recategorized its Premium Individual, Duo, and Family subscription plans as Bundled Subscription Offerings, ostensibly because they now include audiobooks. However, royalties paid on bundled services are considerably lower.
MLC contested this move, arguing that Premium subscribers already had access to audiobooks, and thus, no additional bundling had occurred.
In response, Spotify defended its actions, asserting that the terms in question were mutually agreed upon by publishers and streaming services years ago. The company highlighted its substantial royalty payments, asserting that it disbursed a record sum last year and anticipates an even larger payout in 2024.
Spotify expressed readiness for a prompt resolution of the legal dispute. In February, the streaming platform disclosed that it distributed $9 billion to musicians and publishers in the previous year, with approximately half going to independent artists.
