NEW YORK (CelebrityAccess) – Sony Music Publishing (SMP) is considering legal action against Spotify due to a recent change that reduces royalty payments to songwriters and publishers. The issue stems from Spotify’s decision to reclassify its premium subscription tier as a bundle, which allows it to pay a lower royalty rate.
This decision has already been met with backlash from The Mechanical Licensing Collective (MLC), which filed a lawsuit against Spotify in the United States District Court for the Southern District of New York on Thursday (May 16). The MLC, a non-profit designated by the US Copyright Office, ensures that music streaming services like Spotify pay the mechanical royalties owed to songwriters and music publishers.
Starting in March, Spotify reclassified its Premium Individual, Duo, and Family subscription plans as Bundled Subscription Offerings, as these plans now include access to audiobooks.
Under a 2022 legal agreement known as Phonorecords IV, music publishers and streaming services agreed that bundled services in the US could pay a lower mechanical royalty rate than standalone music subscription services. However, music companies and organizations representing songwriters argue that Spotify’s recent change has underpaid royalties to songwriters and publishers.
In a letter to songwriters and composers, Jon Platt, Chairman and Chief Executive Officer (CEO) of SMG, explained that those represented by SMP now receive approximately 20% less royalties from Spotify streams in the US. Digital Music News obtained the letter.
“Late last year, Spotify added an audiobook offering to its premium subscription tier in the US and several other markets. Spotify then unilaterally reclassified their subscription product as a bundle. They claim this enables them to pay a reduced mechanical royalty rate. In effect, Spotify is taking the position that all US subscribers are part of a bundle without choosing the bundle option.”
Platt also argued that this bundling does not meet the criteria agreed upon in the 2022 US Copyright Royalty Board (CRB Phono IV) proceeding. He stated that Sony Music Publishing is working with the National Music Publishers’ Association (NMPA) “and considering all options to enforce the improved rates achieved in CRB Phono IV.”
The National Music Publishers Association (NMPA) recently sent a letter to Spotify, notifying the company about unlicensed videos, lyrics, and podcasts on its service. Platt mentioned this as “an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform.”
However, Spotify responded to the NMPA’s letter, calling it a “press stunt filled with false and misleading claims,” and argued that the music publishers’ legal threat over alleged infringement was “an attempt to deflect from the Phono IV deal that the NMPA agreed to and celebrated back in 2022.”
