Skip to main content
Find a Lawyer
Please enter a legal issue and/or a location
Begin typing to search, use arrow keys to navigate, use enter to select

Find a Lawyer

More Options

In Tune? Spotify Wins Dismissal in Bundling Royalties Suit

By Kit Yona, M.A. | Reviewed by Joseph Fawbush, Esq. | Last updated on

In a decision many composers and musicians may consider off-key, streaming giant Spotify was successful in having a suit against certain payment rate reductions dismissed in federal court. By defeating the lawsuit brought by the Mechanical Licensing Collective (MCL), the Swedish-based company can continue to pay a lower royalty rate for streaming music in bundled premium packages of music and audiobooks.

The MCL argued that the addition of audiobooks to premium subscription packages shouldn't allow the reduction of royalty rates. Judge Analisa Torres of the U.S. District Court of the Southern District of New York disagreed, ruling on a motion to dismiss that Spotify's plan qualified as a bundle and added value to the product. This meant they didn't violate the Federal Royalty Rate rules.

It Was All Only a Stream

When it comes to music streaming, Spotify is by far the headline act. Hosting more than 100 million songs, the service streams trillions of songs to over 236 million users every year. They expanded into the audiobook field with the 2021 purchase of Findaway, making them available for users in September 2022.

Spotify is required to pay those who own the rights for each stream of their intellectual property. Taking into account variables such as the artist involved and where the stream is taking place, each stream generates between $0.003 and $0.005, or between $3 and $5 for every 1,000 streams. The artist gets 70%, while Spotify claims 30%.

There are certain required conditions before a musical artist can receive payment for the streaming of their creations. A song must stream for at least 30 seconds to count. New artists must be streamed by at least 1,000 unique users in twelve months to qualify to receive royalties. Spotify insists this is to keep bots from being weaponized to abuse the system through false streaming.

For 2023, Spotify claimed to have paid $9 billion in royalties to artists on $13.2 billion in revenue.

Show Me the Money

In March 2024, Spotify announced that its Premium Individual, Duo, and Family subscription streaming plans would use a lower royalty rate to pay for music streamed under the plan. It referred to the new plans as "bundles," with audiobooks being a significant addition.

The MCL filed suit under Section 115 of the Copyright Act in May, claiming artists would suffer from an almost 50% reduction in the rate. Spotify countered that the expected increase in subscribers of the bundled plans would more than make up the difference. With neither side willing to budge, the case proceeded to pre-trial motions.

Send Lawyers, Guns, and Money

On Jan. 29, 2025, Judge Torres issued a ruling on Spotify's motion to dismiss the lawsuit. She found that the addition of audiobook access to the bundled packages was more substantive than a token value. Its inclusion made the reduction of the streaming rate for music — the other part of the package — reasonable under the Federal Royalty Rate rules.

In dismissing the suit, Torres ruled that audiobooks are a distinctly different product than streaming music. Combining the two did indeed constitute a bundle, something MCL had failed to prove as untrue or unlawful. By the letter of the law, Spotify hadn't violated Section 115 of the Copyright Act.

Time for a Different Song

Torres dismissed the suit with prejudice, blocking MCL from refiling with amendments. MLC can still appeal, but as of now, it's unknown if that option strikes a chord with them.

Was this helpful?

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

Or contact an attorney near you:
Copied to clipboard