Sony Music Publishing is considering action against Spotify over a recent change that limits royalty payments to songwriters and publishers in the US.
The dispute centers around Spotify’s decision to reclassify its Premium subscription tier as a bundle, allowing the company to pay a lower mechanical royalty rate to publishers and songwriters than standalone music subscription services.
The move has already drawn criticism from The Mechanical Licensing Collective (The MLC), which sued Spotify in the United States District Court for the Southern District of New York last week (May 16). The MLC is the non-profit organization designated by the US Copyright Office to ensure that music streaming services like Spotify pay the mechanical royalties owed to songwriters and music publishers.
Spotify started reclassifying its Premium Individual, Duo, and Family subscription streaming plans as Bundled Subscription Offerings at the beginning of March as those plans now offer access to audiobooks.
According to a 2022 legal settlement known as Phonorecords IV, music publishers and streaming services agreed that bundled services in the US are allowed to pay a lower mechanical royalty rate to publishers and songwriters compared to standalone music subscription services.
“Late last year, Spotify added an audiobook offering to its premium subscription tier in the US and across several other markets. Spotify then unilaterally reclassified their subscription product as a bundle. They claim this enables them to pay a reduced mechanical royalty rate.”
Jon Platt, Sony Music Publishing
However, music companies and organizations representing songwriters argue that Spotify’s recent move underpays royalties to songwriters and publishers.
In a letter to SMP songwriters and composers penned by Jon Platt, Chairman & CEO of Sony Music Publishing, and first published by Digital Music News, Platt said that SMP songwriters and composers in the US have seen their mechanical royalty payments from Spotify reduced by approximately 20%.
“Late last year, Spotify added an audiobook offering to its premium subscription tier in the US and across several other markets. Spotify then unilaterally reclassified their subscription product as a bundle. They claim this enables them to pay a reduced mechanical royalty rate,” Platt wrote.
“In effect, Spotify is taking the position that all US subscribers are part of a bundle without choosing the bundle option.”
Platt further argued that the bundling does not meet the criteria agreed upon during the last US Copyright Royalty Board (CRB Phono IV) proceeding in 2022.
Platt said SMP is working with the National Music Publishers’ Association “and considering all options to enforce the improved rates that were achieved in CRB Phono IV.”
“We are working with the National Music Publishers’ Association (NMPA) and considering all options to enforce the improved rates that were achieved in CRB Phono IV.”
Jon Platt, Sony Music Publishing
The NMPA recently sent a letter to Spotify, notifying the company about unlicensed videos, lyrics and podcasts on its service, which Platt said is “an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform.”
However, Spotify hit back at the NMPA’s letter, calling it a “press stunt filled with false and misleading claims,” while also arguing that the music publishers’ legal threat over alleged infringement on its platform was “an attempt to deflect from the Phono IV deal that the NMPA agreed to and celebrated back in 2022.”
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