A Timeline of the Music Industry’s Bundling Feud With Spotify (Updating)

NMPA, Nashville Songwriters Association International (NSAI), and Digital Media Association (DiMA) — which represents the streaming services — jointly announced a voluntary settlement to set the rates for Phonorecords IV, the U.S. mechanical royalty rate for 2023-2027. It included the highest headline rate in history, a win for the music business, but it also included a concession to streaming services, allowing them to pay a lower rate for bundling services.

Copyright Royalty Board approved the Phonorecords IV settlement as the official U.S. mechanical royalty rate for 2023-2027, just a few days before it took effect.

Spotify began to roll out 15 hours of free audiobook listening per month to premium users in the U.K., Australia and later the U.S.

March marked the first month that Spotify accounted to pay a discounted “bundle” rate for premium, duo and family plans and the first month that its audiobook-specific tier became available. According to a lawsuit from the MLC: “On March 1, 2024, without advance notice to the MLC, Spotify unilaterally and unlawfully decided to reduce the Service Provider Revenue reported to the MLC for Premium by almost 50 percent.”

Spotify is reported to be upping the price of premium subscriptions in certain markets later this year, including the U.S.

Spotify’s new reclassification of its premium, duo and family plans as bundles was reported for the first time. Though it was known that this would result in significantly less money in U.S. mechanical royalty for publishers and songwriters, the size of the impact was unreported at this time.

In its Q1 earnings call, Spotify announced it would offer a music-only subscription tier, but it did not state when the offering would be released.

Billboard calculated that publishers and songwriters will earn an estimated $150 million less in U.S. mechanical royalties than previously expected in the next twelve months, due to the reclassification of premium, duo and family plans as “bundles.”

Various music publishing and songwriter organizations, including the Recording Academy, Association of Independent Music Publishers, and more issued statements against Spotify’s move to pay songwriters and publishers less in U.S. mechanicals.

NMPA sent a cease and desist letter to Spotify for allegedly hosting lyrics, music videos and podcast content that contain their members’ copyrighted musical works without proper licenses.

The MLC filed a lawsuit against Spotify, alleging that the streamer has “improperly” classified its premium tiers as bundles.

In an exclusive guest column for Billboard, NMPA’s Israelite said: “in addition to these legal challenges, soon we will unveil a legislative proposal to permanently fix the power imbalance songwriters face by being subject to a compulsory license for their songs.” This comment suggests that he will make a concerted effort to change Section 115 of U.S. copyright law, which is what placed U.S. mechanical royalties under CRB regulation in the first place.

The National Music Publishers’ Association (NMPA) has sent a letter to Judiciary Committee leadership in both the U.S. House of Representatives and Senate, asking for the overhaul of the statutory license in section 115 of the Copyright Act, which “prevents private negotiations in a free market” for mechanical royalty rates for songwriters and music publishers in the U.S.

The NMPA wrote that it believes that allowing rate negotiations to occur in a free market could prevent songwriters and publishers from being taken advantage of by “Big Tech:” “Those who do operate in a free market, such as record labels, have negotiated protections against bad faith tactics. However, music publishers and songwriters have no such leverage under the [Copyright Royalty Board] to do so.”

NMPA CEO/president David Israelite announced at its annual meeting that the organization has filed an official complaint with the Federal Trade Commission (FTC) and sent letters to the attorneys general for nine states as well as consumer trade groups to try to stop Spotify from reclassifying its premium tiers as “bundles.” The NMPA alleges that Spotify has violated the Restore Online Shoppers’ Confidence Act (“ROSCA”), section 5 of the FTC Act and various consumer protection laws.

Spotify officially unveiled a music-only “basic” plan costing $10.99 that it previously teased during its Q1 earnings call. That’s $1 less than the service’s premium individual tier, which includes 15 hours of audiobook listening per month.