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After the court granted Spotify’s motion to dismiss the lawsuit brought by the Mechanical Licensing Collective (MLC) in May 2024, the organization says it is evaluating all options—including appealing the decision.
“We continue to be concerned that Spotify’s actions are not consistent with the law, and that yesterday’s decision does not align with the facts and legal principles central to this action,” the MLC tells Digital Music News. “[The MLC] are reviewing the decision and evaluating all available options, including our right to appeal. We will keep you informed as we explore our next steps.”
Spotify’s bundling of audiobooks into its Premium Individual, Duo, and Family subscription plans are at the heart of the issue. Applying the rate formula applicable to bundled subscription offerings resulted in a reduction of the service provider revenue that Spotify reports, resulting in an underpayment of royalties. Digital Music News has kept diligent track of these reductions. In November 2024, DMN reported an estimated $100 million ‘saved’ by Spotify since shifting 98% of its subscribers to the ‘bundled’ option.
With the lawsuit successfully dismissed in court, Wall Street analysts are betting big on SPOT stock. KeyBanc raised the firm’s price target on SPOT to $600 from $555, based on subscriber, revenue, and margin momentum. KeyBanc also believes with the UMG deal renewed earlier than expected, Spotify will drive its revenue growth closer to its 20%+ target.
‘Bundled’ revenue is treated differently than revenue from music-only plans under the Phonorecords IV determination. 99% of Spotify’s U.S. subscriptions now fall under the ‘bundled’ designation. Amazon appears to be following Spotify’s example, adding audiobook to its Amazon Music Unlimited plan at no additional cost. The move suggests other DSPs are watching closely to see if they can move most of their subscribers to bundled plans for a significant cost savings for the DSP—and at detriment to publishers and songwriters.