Spotify has issued a strong response to the Mechanical Licensing Collective's (MLC) lawsuit regarding alleged underpayment of publishing royalties. The dispute centers on Spotify's bundling practices for its various content offerings, including music, audiobooks, and podcasts.

Key Points of the Dispute:

• The MLC claims Spotify is illegally undercutting royalty obligations through its bundling strategy
• Spotify maintains that bundling discounts were explicitly included in the Phonorecords IV agreement
• The streaming platform reports record publisher payments in 2023, with projected increases for 2024

Spotify's Defense:

1. Bundling terms were agreed upon by publishers and streaming services in the Phonorecords IV agreement
2. Multiple DSPs (Digital Service Providers) include bundles in their subscription offerings
3. Major labels have generally supported Spotify's bundling strategies

The MLC's Position:

• Claims Spotify incorrectly classifies Premium Individual, Duo, and Family plans as bundled subscriptions
• Argues this classification reduces reported service provider revenue and subsequent royalty payments
• Seeks corrected reporting and unpaid royalties from March 2024 onwards

Context: The MLC, established by Congress in 2018, has distributed over $2 billion to songwriters and publishers since January 2021. This dispute highlights the complex relationship between streaming platforms, publishers, and the broader music industry.

While Spotify expresses confidence in a swift resolution, the outcome of this legal battle could have significant implications for how streaming services structure their bundled offerings and calculate royalty payments in the future.

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