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It turns out Spotify isn’t happy about facing the Mechanical Licensing Collective’s revived bundling lawsuit. Now, the DSP has fired back against the amended complaint, which is allegedly “unsupportable by the facts” and “as baseless as the one that this court already rejected.”
Spotify answered the action today, two weeks and change following the MLC’s jury demand. And the latter, for its part, arrived after the presiding judge in late September agreed to let the case – which had been dismissed with prejudice in January – resume with a couple fresh arguments.
Long story short, the original complaint challenged Spotify’s actual bundling classification of Premium – a classification that, many are now aware, is very significant from the compositional-royalties perspective.
But upon tossing the suit, the court emphasized that “audiobook streaming is a product or service that is distinct from music streaming and has more than token value” – and that “Premium is, therefore, properly categorized as a Bundle.”
Enter the revamped claims of the MLC, which is litigating over the “artificially inflated” $9.99 price point attached to Spotify’s audiobooks offering and over the alleged presence of music in the audiobooks-only plan.
(A worthwhile side note before diving into Spotify’s retort: The Latham & Watkins-repped platform’s initial win was and apparently still is being touted as a big deal in the legal world. January brought a bit of law-trade praise for the appropriate attorneys, who are currently in the running for the Financial Times’ “Innovative Lawyers in Disputes and Litigation” award.)
Back to Spotify’s answer, the response rather unsurprisingly begins by reiterating the MLC’s “decisive defeat on the central issue that prompted this litigation.”
“The law is settled: Spotify is entitled to pay royalties on Premium to MLC based solely on the portion of subscription revenue attributable to music,” the legal text spells out before taking aim at the plaintiff’s “two peripheral issues…both of which are unsupportable by the facts.”
“But $9.99 is, if anything, a conservatively low price,” the answer proceeds with regard to the first of the two issues. “Of the audiobook subscriptions in the market that give access to the equivalent range of bestsellers available on Spotify, none can be purchased for less than $9.99, and most cost much more.
“The least expensive of the audiobook services cited by MLC in its Amended Complaint, Amazon’s Audible Plus, is $7.95, and it gives access to virtually no bestsellers.
Furthermore, “[n]o other subscription audiobook service in the U.S. of which Spotify is aware costs less than $7.95 per month. What this means is that the least that the audiobook component of Spotify Premium could conceivably be valued at, consistent with the law, is $7.95 per month.”
(As the MLC will almost certainly point out, Audible Plus does, however, offer subscribers unlimited listening, whereas Spotify’s Audiobooks Access plan is capped at 15 hours per month. Also, what exactly constitutes a “bestseller,” especially in the audiobooks space?)
In any event, the way the defendant sees things, “even if Spotify were to use $7.95 as the standalone price in the Bundle calculation (which it should not), the result would be an extremely small percentage increase in royalties paid to the MLC.”
A similar defense is front and center when it comes to the second of the MLC’s above-highlighted arguments, pertaining this time to music’s availability via the audiobooks-only tier and the corresponding alleged obligation to cough up royalties.
“The music component of Audiobooks Access is Spotify Free, which is a nonsubscription music offering that is given free to any consumer. Therefore, there is no plausible argument that ‘Audiobook[s] Access’ could in fact be a ‘Bundle’ under the existing regulations.
“But even if MLC’s theory could be correct, the royalties at stake with respect to this issue, even if they could be properly calculated, would be miniscule—a drop in comparison to the ocean of royalties Spotify pays to the MLC,” the answer reads.
“Ultimately, despite public statements by MLC and publisher representatives to the contrary,” the document drives home, “MLC’s remaining claims would not result in any dramatic increase in royalty payments to songwriters and publishers… All of this raises serious questions about MLC’s motivations in continuing to spend resources on this litigation.”
Spotify Fires Back Against the MLC’s Amended Bundling Lawsuit, Says the New Arguments Are ‘unsupportable by the Facts’
The Core of the Legal Battle: Bundling Royalties in the spotlight
Spotify and the Mechanical Licensing Collective (MLC) are locked in a complex legal dispute involving the management and distribution of royalties to songwriters. At the heart of this conflict lies the bundling royalties issue,where Spotify’s revised royalty structure has come under scrutiny by the MLC.
The MLC’s amended bundling lawsuit alleges that Spotify’s payment methods unfairly group or “bundle” various licensing fees, potentially shortchanging songwriters and music publishers. Spotify has responded briskly,calling these claims “unsupportable by the facts,” and defended its royalty calculations vigorously.
Understanding Spotify’s Defense Against the MLC’s Claims
Spotify’s legal team states that the revised royalty structure aligns with industry standards and regulatory statutes governing streaming royalties. The company emphasizes clarity in its payment and licensing processes, countering that the MLC’s amended arguments lack factual merit and robust evidence.
Key Points in Spotify’s Rebuttal:
- Adherence to Regulatory Requirements: Spotify insists that its royalty payments conform strictly to legal and contractual obligations.
- Accurate Royalty Distribution: The platform asserts that royalties are calculated fairly and reflect actual usage data, thereby preserving songwriter earnings.
- Lack of Evidence: spotify challenges the MLC to provide clear, demonstrable proof that bundling has caused any incentivized harm.
- Previous Legal Victories: The company points to past favorable rulings supporting its stance on royalty distribution mechanisms.
The Royalty Bundling Dispute: What Does It Mean for Songwriters?
The centerpiece concern raised by the MLC is that Spotify’s bundling of royalties-combining mechanical and performance royalties-could lead to discrepancies in payment flows to songwriters. According to the MLC, this might reduce overall income for creators or obfuscate earnings reports.
| Stakeholder | Concern | Spotify’s Response |
|---|---|---|
| songwriters & Publishers | Potential underpayment due to bundling | Payments are verified and aligned with actual usage and legal frameworks |
| MLC | Allegation of infringing bundling practices | Claims described as legally and factually baseless |
| Spotify | Defense against claims; maintaining royalty system | Maintains transparency; cites prior court rulings |
Legal Background: Spotify’s Past Victory Over the MLC’s Bundling Lawsuit
This current amended lawsuit builds upon an earlier legal battle in which Spotify secured a significant victory. A federal judge ruled in favor of Spotify’s revised royalty structure, effectively rejecting the initial claims made by the MLC.
”Spotify has won a legal battle against The Mechanical Licensing Collective (MLC), with a federal judge ruling in favor of the streaming giant’s revised royalty structure.”
– MusicRow
This favorable ruling underscored the legitimacy of bundled royalties, reinforcing the company’s business model and royalty allocation methods.It also sent a powerful message to the MLC and similar entities, highlighting the need for concrete evidence in future claims.
What Songwriters need to Know: Practical Tips & Next Steps
If you’re a songwriter or music publisher concerned about your royalties amid the Spotify-MLC dispute, here are some practical pointers:
- Stay Informed: Regularly check official updates from both Spotify and the MLC to understand how the settlement or court decisions may affect your income.
- Use the MLC Portal: songwriters and publishers can claim their works thru the Mechanical Licensing Collective (MLC) Portal, especially if part of class settlements related to claims or lawsuits.
- Review your Royalty statements: Keep meticulous records of royalty payments and audit statements to ensure you receive fair compensation.
- Seek Legal Advice if Needed: For complex concerns, consulting an entertainment law specialist can help clarify your rights and options.
Case Study: How the Lawsuit Impacts Royalty payments
Consider a songwriter who releases music primarily streamed on Spotify. With the MLC’s lawsuit focused on how royalties are bundled and paid, potential uncertainties arise regarding whether mechanical and performance royalties are fully accounted for.
In the wake of Spotify’s defense, here’s a simplified example to illustrate what creators might expect:
| Scenario | Without Bundling | With Spotify’s Bundling Approach |
|---|---|---|
| Royalty Streams Counted | Mechanical and performance royalties handled separately | Royalties bundled but transparently accounted for in one payment |
| Payment Process | separate statements, possible delays or confusion | Consolidated payment stream with detailed breakdown |
| Potential for Underpayment | Higher risk due to complexity | Lower risk; Spotify asserts accurate allocations supported by data |
How the MLC’s Arguments Fall Short: Spotify’s Fact-Based Critique
Spotify’s rebuttal emphasizes several critical weaknesses in the MLC’s amended lawsuit:
- Lack of Empirical Evidence: The MLC has not produced quantifiable proof that their alleged improper bundling harmed songwriters’ earnings.
- misinterpretation of Licensing Norms: The MLC’s arguments allegedly misconstrue accepted industry standards and the legal frameworks around licensing mechanical rights on streaming platforms.
- Overlooking Prior Rulings: Spotify notes that prior court decisions already settled the debate on bundling royalties within its licensing structure.
- Potential Negative Impacts on Royalty Efficiency: Changing the bundled system could introduce inefficiencies and delays, potentially hurting the very artists the MLC claims to protect.
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