Sony Music Publishing, the music publishing industry’s heavyweight, is now taking legal action against Spotify over its unwelcome royalty cutbacks.
Spotify has just stabbed another enormous bear with its switch to bundled subscription packages—and the correspondingly lower publication royalty obligations. According to internal conversations released to Digital Music News early Friday (May 17th), Sony Music Publishing president Jon Platt isn’t pleased with Spotify’s moves and may take action.
As if a lawsuit from the Mechanical Licensing Collective (MLC) and a cease-and-desist letter from the National Music Publishers’ Association weren’t enough, Platt has now promised to consider all possibilities.
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In a letter addressed earlier today to member songwriters and composers, Platt clearly detailed the issue and potential next steps. “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,” stated Platt.
“In addition, earlier this week, the NMPA sent a letter to Spotify putting them on notice that there are unlicensed videos, lyrics, and podcasts on its service, an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform.”
Earlier this morning, Spotify informed DMN that it firmly disagrees with the MLC lawsuit. The site highlighted to its newly signed ‘Phonorecords IV’ agreement, which governs mechanical publication royalties and includes bundling provisions.
READ MORE: Spotify Introduces Music Videos To Its Streaming Platform
“The [MLC] lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement,” Spotify wrote in an email to DMN, citing to a ‘celebratory’ notice issued at the time by the National Music Publishers’ Association.
Platt and Sony Music Publishing view things differently. “We do not agree with Spotify’s position,” Platt stated. “While the CRB rate structure allows for a discounted bundle rate in certain circumstances, we do not believe this offering falls within the parameters that were agreed in the last CRB proceeding.”
Separately, the music business is reportedly discussing whether a ‘nuclear option’ could come next.
However, unlike Lucian Grainge’s brave TikTok withdrawal, music publishers may be unable to remove their content unilaterally. For starters, Spotify and the Mechanical Licensing Collective (MLC) are currently engaged in a legal struggle, with a court deciding if laws and contracts are being violated. Spotify may succeed, which implies that publishers will be unable to remove content under statutory and obligatory licensing regulations.
Beyond mechanical royalties, there’s also the issue of music incorporation in podcasts and films. The NMPA has warned Spotify about the use of music in podcasts and the placement of lyrics in videos. These are not covered by statute and require direct handshakes and authorizations to prevent direct violation.
Here’s the full letter sent by Platt just hours ago.
Dear Songwriters and Composers,
I’m writing to share an important update regarding the mechanical royalties that Spotify pays you in the United States.
Until recently, Spotify has been paying songwriters at the improved headline rate that was agreed upon in the last U.S. Copyright Royalty Board (CRB Phono IV) proceeding in 2022.
Late last year, Spotify added an audiobook offering to its premium subscription tier in the U.S. 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. In effect, Spotify is taking the position that all U.S. subscribers are part of a bundle without choosing the bundle option.
Beginning with their March 2024 accountings, Spotify began to pay at the discounted rate that they claim they are entitled. This has the effect of reducing mechanical royalty payments to songwriters by approximately 20%. The reduction does not currently impact royalties outside of the U.S.We do not agree with Spotify’s position. While the CRB rate structure allows for a discounted bundle rate in certain circumstances, we do not believe this offering falls within the parameters that were agreed in the last CRB proceeding.
Yesterday, the Mechanical Licensing Collective (MLC) filed a lawsuit in Federal Court in New York City challenging Spotify’s actions.
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. In addition, earlier this week the NMPA sent a letter to Spotify putting them on notice that there are unlicensed videos, lyrics and podcasts on its service, an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform.
I will continue to reach out directly with important updates as they come.
Jon Platt
Chairman & CEO, Sony Music Publishing
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