Photo Credit: MLC
The MLC’s legal arguments against Spotify’s bundling embrace are “nonsensical and factually unsupportable” – at least according to the streaming platform itself, which has filed to dismiss the overarching unpaid-royalties complaint.
Spotify just recently urged the court to toss the action with prejudice, about one month after outlining its position in a pre-motion letter. Predictably, the service’s stance on its highly controversial audiobook bundles hasn’t changed in the interim.
For a quick refresher, Spotify earlier in 2024 reclassified its main U.S. subscription options as bundles – shifting the status of nearly all its paid accounts in the process – after rolling out a standalone audiobook-only tier. (A music-only alternative would go live later, following ample pushback from compositional rightsholders.)
While a seemingly small deal in general, the move is having a decidedly significant effect on the size of Spotify’s U.S. mechanical payments. Confirming DMN Pro calculations, Spotify in July revealed it’d saved close to $50 million in mechanicals between March and June.
In the interest of brevity, that’s because royalties are calculated in vastly different ways for bundled and non-bundled streaming revenue under the Phonorecords IV determination, which runs through 2027. And to put it mildly, the unilateral bundling reclassification (and the massive falloff in compensation) isn’t exactly sitting right with publishers – or the MLC.
Having submitted the appropriate action back in May, the MLC is of the belief that the packages in question don’t count as bundles at all.
As we’ve covered in detail, the entity’s qualms encompass but aren’t confined to the opinion that audiobooks access doesn’t constitute a “differentiated product” and “does not have more than the ‘token value’ required” for bundle classification. In sum, that means Spotify owes many millions of dollars in unpaid royalties, per the MLC.
Enter Latham & Watkins-repped Spotify’s new dismissal motion, which describes the MLC’s arguments as not only “nonsensical and factually unsupportable,” but meritless, wasteful, audacious, baffling, misguided, demonstrably wrong, and strained.
“At the heart of this dispute is an easily answered question: Is audiobook streaming distinct from music streaming, offering greater than token value?” the motion sums up. “The answer is indisputably yes, and there is no need for federal court litigation to confirm it.”
Running with the point, Spotify, now testing the visual-media waters well outside the podcasting realm, has doubled down on the view that audiobook listening “is quite obviously a distinct ‘product or service’ from music streaming” and that 15 hours of monthly access “carries more than token value.”
Furthermore, regarding what’s actually a bundle, it doesn’t matter (in terms of the “token value” claim or otherwise) that Spotify integrated audiobook listening in November of 2023 before formally leaning into bundles via updated packages in the new year, according to the platform.
“But Spotify Premium met the criteria for Bundle treatment in November, too,” reads one section of the filing, “and in each month after that; in other words, Spotify could have reported Spotify Premium as a ‘Bundle’ during each of those months as well. But it was not required to do so, and MLC cannot point to any legal authority to suggest otherwise.”
To be sure, as Spotify sees things, Phono IV doesn’t compel it “to offer a standalone audiobook streaming product at all, let alone market it in a particular way,” in order to secure the bundling status at the suit’s center.
With all that said, dismissing with prejudice would be “particularly appropriate here because MLC does not pay its own legal fees, as its operating costs (including litigation expenses) are funded by the music streaming services, including Spotify,” the no-holds-barred motion states towards its conclusion.
