Music Streaming Giant Spotify Sued Over Millions in Allegedly Unpaid Music Royalties

Spotify has been hit with a lawsuit in New York federal court that accuses the streaming giant of underpaying songwriting royalties for tens of millions of songs.

The lawsuit against Spotify USA was filed in New York on Thursday by the Mechanical Licensing Collective (MLC), a non-profit that collects and distributes royalties owed from music streaming services.

The suit alleges that Spotify on March 1, without advance notice, reclassified its paid subscription services, resulting in a nearly 50 per cent reduction in royalty payments to MLC.

The complaint cites a Billboard report that estimates Spotify's move could cost songwriters nearly $150 million over the next year.
"Spotify paid a record amount to publishers and societies in 2023 and is on track to pay out an even larger amount in 2024," a Spotify spokesperson said in a statement. "We look forward to a swift resolution of this matter."

MLC chief executive Kris Ahrend said in a statement that the collective "takes seriously its legal responsibility to take action on behalf of our members when we believe usage reporting and royalty payments are materially incorrect."

US law allows streaming services like Spotify to obtain a blanket "compulsory license" to copyrighted music at a specific royalty rate. The US Copyright Office appointed MLC to collect royalties for songwriters and music publishers.

The group's lawsuit said that after adding audiobook access, Spotify incorrectly recharacterised its service in a way that would significantly reduce the amount of royalties it owed under the license, "even though there has been no change to (Spotify's) Premium plan and no corresponding reduction to the revenues that Spotify generates."

"Spotify's attempt to reduce its mechanical royalties has resulted in a clear breach of its obligations," the complaint said. The MLC asked the court for an unspecified amount of monetary damages for Spotify's alleged unpaid royalties and late fees.

The case is Mechanical Licensing Collective v. Spotify USA Inc, US District Court for the Southern District of New York, No. 1:24-cv-03809.

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