Spotify faces a lawsuit in New York federal court, accusing the streaming giant of underpaying songwriting royalties for tens of millions of songs. The royalty-gathering nonprofit Mechanical Licensing Collective filed the lawsuit late Thursday, alleging that Spotify underreported its revenue by nearly half to avoid paying millions of dollars owed to the group.
The complaint cites a Billboard report estimating that Spotify’s actions could cost songwriters nearly $150 million over the next year.
“Spotify paid a record amount to publishers and societies in 2023 and is on track to pay out an even larger amount in 2024,” a Spotify spokesperson stated on Friday. “We look forward to a swift resolution of this matter.”
MLC chief executive Kris Ahrend emphasized in a statement that the collective “takes seriously its legal responsibility to take action on behalf of our members when we believe usage reporting and royalty payments are materially incorrect.”
U.S. law allows streaming services like Spotify to obtain a blanket “compulsory license” to copyrighted music at a specific royalty rate. The U.S. Copyright Office appointed MLC to collect royalties for songwriters and music publishers.
The group’s lawsuit claims that after adding audiobook access, Spotify incorrectly recharacterized its service to significantly reduce the amount of royalties it owed under the license, “even though there has been no change to [Spotify’s] Premium plan and no corresponding reduction to the revenues that Spotify generates.”
“Spotify’s attempt to reduce its mechanical royalties has resulted in a clear breach of its obligations,” the complaint asserts.
The MLC is asking the court for an unspecified amount of monetary damages for Spotify’s alleged unpaid royalties and late fees.
