The Mechanical Licensing Collective (MLC) is considering all available options, including an appeal, following Spotify's successful court dismissal of their lawsuit regarding bundling practices.

The MLC expressed concern that Spotify's actions violate existing law, stating the court's decision doesn't align with key facts and legal principles. The organization is currently reviewing the decision while exploring next steps.

At the core of the dispute is Spotify's strategy of bundling audiobooks into its Premium subscription plans (Individual, Duo, and Family). This bundling practice has reportedly allowed Spotify to reduce its reported service provider revenue, leading to lower royalty payments. Digital Music News estimates Spotify has saved approximately $100 million since moving 98% of its subscribers to bundled options.

Following the court victory, Wall Street has responded positively, with KeyBanc raising Spotify's price target to $600 from $555, citing strong subscriber growth and margin momentum. The firm's renewed Universal Music Group deal has further strengthened its market position.

The implications of this ruling extend beyond Spotify, as other Digital Service Providers (DSPs) like Amazon are now implementing similar bundling strategies. Amazon Music Unlimited recently added audiobooks at no additional cost, suggesting a potential industry-wide shift toward bundled offerings—a move that could significantly impact publisher and songwriter revenues.

Under the Phonorecords IV determination, bundled revenue receives different treatment compared to music-only plans. With 99% of Spotify's U.S. subscriptions now classified as bundled, this court decision could set a precedent for how streaming services structure their offerings and calculate royalty payments moving forward.

Related Articles

Previous Articles