Spotify Beats MLC Audiobook Lawsuit After Judge Calls Federal Royalty Rules ‘Unambiguous’
Written by djfrosty on January 29, 2025
Spotify won a ruling Wednesday dismissing a lawsuit from the Mechanical Licensing Collective that accused the streamer of unfairly slashing royalty rates, with a federal judge ruling that Spotify’s move was supported by “unambiguous” regulations.
The MLC sued last year, claiming Spotify had “unilaterally and unlawfully” chosen to cut its music royalty payments nearly in half through bookmaking trickery – namely, by claiming that the addition of audiobooks to the platform entitled the company to pay a lower “bundled” rate.
But in her decision on Wednesday, Judge Analisa Torres said that federal royalty rate rules clearly allowed Spotify to legally claim the lower rate, rejecting MLC’s argument that the company was not actually offering a “bundle” of services.
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“Audiobook streaming is a product or service that is distinct from music streaming and has more than token value,” the judge wrote, alluding to the specific wording of the federal rule. “Premium is, therefore, properly categorized as a Bundle.”
A spokeswoman for the MLC did not immediately return a request for comment on the ruling.
The MLC, which collects streaming royalties for songwriters and publishers, filed its lawsuit in late May — a week after Billboard estimated that Spotify’s move would result in the company paying roughly $150 million less over the next year. In its complaint, the MLC claimed Spotify was “erroneously recharacterizing” the nature of its streaming services to secure the lower rate.
“The financial consequences of Spotify’s failure to meet its statutory obligations are enormous for songwriters and music publishers,” the group’s attorneys wrote at the time. “If unchecked, the impact on songwriters and music publishers of Spotify’s unlawful underreporting could run into the hundreds of millions of dollars.”
At issue in the lawsuit is Spotify’s recent addition of audiobooks to its premium subscription service. The streamer believes that because of the new offering, it’s now entitled to pay a discounted “bundled” royalty rate under the federal legal settlement that governs how much streamers pay rightsholders.
In Wednesday’s ruling, Judge Torres agreed. She said the rules required only that Spotify offered a different service and that it provided users with more than “token value” – and that the addition of audiobooks was clearly covered by those terms.
MLC’s attorneys had argued that audiobooks were that kind of “token” non-factor, since Spotify didn’t raises prices when it added them and only a small proportion of subscribers actually listen to them. MLC had claimed Spotify added the books was merely a “pretext” to cut rates for music.
Spotify moved to dismiss the case in August, calling it “nonsensical” and “wasteful.” The company’s attorneys blasted the MLC’s argument that the audiobooks were aimed at a legal loophole, saying it “profoundly devalues the contributions of the tens of thousands of book authors.”
In her decision on Wednesday, Judge Torres sided with Spotify’s argument. Though she said the new offering might strike ordinary consumers as more of a “two-for-one deal” than a traditional bundle, she said Spotify’s addition of the books had clearly brought more than nominal value to its users.
“MLC cannot plausibly claim that having access to audiobooks is not something of intrinsic and monetary value to many, even if only a fraction of Spotify’s millions of Premium subscribers may take advantage of it,” the judge wrote. “The court can draw only one conclusion: that 15 hours of monthly audiobook streaming is a product or service that has more than token value.”
If anything, Judge Torres said, Spotify had “likely paid more in royalties to MLC than it was otherwise required to pay” because it did not immediately claim bundled status after introducing the audiobook feature.
In addition to dismissing the lawsuit, Judge Torres did not give MLC a chance to refile the case, saying the law was clear and that amending the accusations would be futile. The group can still challenge the ruling at a federal appeals court, however.
In a statement to Billboard on Wednesday, a Spotify spokesperson said the company was “pleased” with the court’s decision: “Bundle offerings play a critical role in expanding the interest in paying for music and growing the pie for the music industry. We know the regulations can be complex, but there’s plenty of room for collaboration—and our recent deal with [Universal Music Publishing Group] shows how direct licenses can create flexibility and additional benefits.”