On Wednesday, Spotify successfully convinced a New York federal judge to dismiss a lawsuit accusing the streaming giant of underpaying royalties for tens of millions of songs. The lawsuit, filed by the royalty-gathering nonprofit Mechanical Licensing Collective (MLC), alleged that Spotify had misreported its revenue to avoid paying millions of dollars owed to songwriters and publishers.
U.S. District Judge Analisa Torres ruled in Spotify's favor, stating that the streaming service had correctly categorized its Premium subscription as a bundled service when it added audiobooks, a move that significantly lowered the royalties paid to songwriters. The court’s decision aligns with Spotify’s argument that audiobook streaming constitutes a distinct product with more than token value, thereby justifying its classification as a bundle under current regulations.
A spokesperson for Spotify expressed satisfaction with the ruling, while representatives from the MLC did not immediately respond to requests for comment. The nonprofit, appointed by the U.S. Copyright Office to collect royalties for songwriters and publishers, had argued that Spotify’s classification maneuver unfairly reduced its obligations without any actual change to its Premium plan or revenue.
The controversy surrounding Spotify’s royalty practices highlights growing concerns over the fairness of the pay-per-stream model. Critics argue that this model is inherently flawed and easily subject to fraudulent manipulation, further disadvantaging songwriters and smaller artists. While major platforms like Spotify continue to benefit from legal loopholes, alternative services like Bandcamp and OohYeah are emerging with more equitable profit-sharing models.
Spotify’s legal victory also serves as a reminder of the company’s roots and its controversial history within the music industry. Figures like Sean Parker, the founder of Napster—a peer-to-peer network infamous for music piracy—played a crucial role in Spotify’s rise. Parker, once sued by major labels, later invested in Spotify, helping to shape it into the billion-dollar enterprise that made its CEO, Daniel Ek, one of the wealthiest figures in tech.
Despite this latest legal win, Spotify remains under scrutiny for its treatment of artists. The dismissed lawsuit estimated that the platform’s reclassification could cost songwriters nearly $150 million annually, further fueling the debate over fair compensation in the streaming era. As the music industry evolves, the demand for more artist-friendly platforms and business models continues to grow, challenging the status quo upheld by industry giants like Spotify.
