Spotify Is Paying Songwriters Less, And A Federal Judge Says That’s OK

Artist often complain about the royalty payout from Spotify, but they’re making great money compared to songwriters. Generally songwriters make about a quarter of what an artist makes, but that’s going to decrease even further after a federal judge ruled in favor of Spotify over the Mechanical Licensing Collective (MLC) in a lawsuit about bundled services.

What happened is that last year Spotify added 15 hours of free audiobook listening to Spotify premium, duo and family plans in the United States and other markets, creating a “bundle.” According to the Phonorecords IV that lays out U.S. mechanical royalty rates for 2023 through 2027, bundles of multiple products are classified as a different type of subscription and as a result can have a lower royalty rate, since several products are purchased under the same subscription price.

Billboard Magazine has estimated that it would cost songwriters around $150 million a year as a result. Obviously this would would please Wall Street, which is what Spotify is all about these days.

The Lawsuit

In the lawsuit, the MLC (which collects streaming royalties for songwriters and publishers) accused Spotify of basically gaming the system in order to pay a lower royalty rate, since what it was offering wasn’t really a bundle of services.

But Judge Analisa Torres disagreed and wrote that the federal royalty rate rules clearly allowed Spotify to legally claim the lower rate, and that the company truly was offering a bundle.

Note that the judge didn’t rule whether what Spotify is doing is fair or not, only if it was legal, and she clearly believes that it is.

Phonorecords IV was agreed upon back in 2022 and even though it was only 3 years ago, the streaming landscape was different. The bundles that were being offered then were based around video streaming or phone service, and little thought was given to audiobook bundles at the time.

Although the MLC hasn’t announced whether it would appeal the decision yet, don’t be surprised if it happens soon.