Spotify, the renowned music streaming service, has been sued by the Mechanical Licensing Collective (MLC) in a New York federal court. For allegedly underpaying songwriting royalties on tens of millions of songs. Filed late Thursday, the lawsuit claims that Spotify significantly underreported its revenue, purportedly to avoid paying millions of dollars owed to songwriters.
Spotify has misrepresented its service
According to the complaint, which references a report from Billboard, Spotify’s actions could potentially cost songwriters nearly $150 million over the next year. The MLC, a royalty-gathering nonprofit appointed by the U.S. Copyright Office, asserts that Spotify has misrepresented its service by adding audiobooks without adequately adjusting the royalty calculations. This mischaracterization, they claim, could unjustly reduce the royalties owed under the current compulsory licensing agreement. Despite no changes to Spotify’s Premium plan or a decrease in its revenue streams.
In response to the lawsuit, a Spotify spokesperson stated on Friday, “Spotify paid a record amount to publishers and societies in 2023 and is on track to pay out an even larger amount in 2024. We look forward to a swift resolution of this matter.” This statement suggests that the company believes the allegations will be resolved without significant impact on their operations.
Fair compensation for songwriters and music publishers
Kris Ahrend, CEO of the MLC, emphasized the seriousness of the allegations. He said that that the organization “takes seriously its legal responsibility to take action. This lawsuit marks a significant effort by the MLC. A fight to ensure fair compensation for songwriters and music publishers whose works are streamed on platforms like Spotify.
U.S. copyright law provides streaming services the ability to obtain a blanket “compulsory license” for copyrighted music at specific royalty rates. They need to simplify the music licensing process while ensuring compensation for creators. The MLC’s role is to collect these royalties on behalf of songwriters and publishers, making sure they receive their fair share of the revenue from services using their music.
The legal complexities of this potentially landmark case
The lawsuit has raised concerns about the potential implications for Spotify’s relationship with songwriters and the music industry at large. Particularly regarding how music streaming services manage their revenues and determine royalties. The MLC has requested the court for an unspecified amount of monetary damages for the alleged unpaid royalties and associated late fees.
The case, titled Mechanical Licensing Collective v. Spotify USA Inc, is set to unfold in the U.S. District Court for the Southern District of New York, under case number 1:24-cv-03809. Representatives for the MLC, Jay Cohen and Darren Johnson of Paul Weiss Rifkind Wharton & Garrison, are poised to navigate the legal complexities of this potentially landmark case.
Source: Reuters / Photo: AI generated
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