Spotify Sued for Allegedly Underpaying Royalties by Tens of Millions

Music streaming giant Spotify has been sued in a U.S. federal court for allegedly underpaying songwriters, composers, and publishers by tens of millions of dollars.

The lawsuit, filed by the Mechanical Licensing Collective (MLC) in New York on Thursday, claims that Spotify reclassified its paid subscription services on March 1 without advance notice, resulting in nearly a 50% reduction in royalty payments to the MLC.

“The financial consequences of Spotify’s failure to meet its statutory obligations are enormous for songwriters and music publishers,” the MLC stated.

“If unchecked, the impact on songwriters and music publishers of Spotify’s unlawful underreporting could run into the hundreds of millions of dollars.”

According to the MLC, Spotify reclassified its Premium Individual, Duo, and Family subscription plans as Bundled Subscription Offerings because they now include audiobooks. Royalties paid on bundled services are significantly less.

MLC argued that Premium subscribers already had access to audiobooks, and “nothing has been bundled with it.” They claimed, “Premium is exactly the same service that Spotify offered to its subscribers before the launch of Audiobooks Access.”

In response, Spotify stated that the lawsuit “concerns terms that publishers and streaming services agreed to and celebrated years ago.” The company highlighted that it paid a “record amount” in royalties last year and is “on track to pay out an even larger amount in 2024.”

“We look forward to a swift resolution of this matter,” the Swedish company added.

In February, Spotify reported it paid $9 billion to musicians and publishers last year, with about half of that amount going to independent artists.