Sony Music Publishing ‘Considering All Options’ Against Spotify Following MLC Litigation, NMPA Warnings

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Music publishing heavyweight Sony Music Publishing is now threatening action against Spotify over its less-than-welcomed royalty reductions.

Spotify has just poked another giant bear following its transition to bundled subscription packages—and the conveniently lower publishing royalty payouts that come with them. According to internal communications leaked to Digital Music News early Friday (May 17th), Sony Music Publishing chief Jon Platt isn’t in a rosy mood following Spotify’s maneuvers and may take action.

As if a lawsuit from the Mechanical Licensing Collective (MLC) and a cease-and-desist from the National Music Publishers’ Association isn’t enough, Platt is now promising to put all options on the table.

Platt succinctly outlined the issue and possible next steps in a letter sent to member songwriters and composers earlier today. “We are working with the National Music Publishers’ Association (NMPA) and considering all options to enforce the improved rates that were achieved in CRB Phono IV,” Platt relayed.

“In addition, earlier this week, the NMPA sent a letter to Spotify putting them on notice that there are unlicensed videos, lyrics, and podcasts on its service, an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform.”

Earlier this morning, Spotify told DMN that it strongly disagrees with the MLC lawsuit. The platform pointed to its recently signed ‘Phonorecords IV’ agreement governing mechanical publishing payouts, which includes stipulations related to bundling.

“The [MLC] lawsuit concerns terms that publishers and streaming services agreed to and celebrated years ago under the Phono IV agreement,” Spotify emailed DMN while linking to a ‘celebratory’ announcement issued at the time by the National Music Publishers’ Association (NMPA).

Platt and Sony Music Publishing see matters differently. “We do not agree with Spotify’s position,” Platt noted. “While the CRB rate structure allows for a discounted bundle rate in certain circumstances, we do not believe this offering falls within the parameters that were agreed in the last CRB proceeding.”

Separately, music industry chatter is now focused on whether a ‘nuclear option’ could be next.

But unlike Lucian Grainge’s gutsy TikTok pullout, music publishers may be unable to pull their content unilaterally. For starters, Spotify and the Mechanical Licensing Collective (MLC) are now locked in a legal battle, with a court adjudicating whether laws and contacts are being broken. It’s quite feasible that Spotify prevails, which means that publishers won’t have the ability to remove content under statutory and compulsory licensing rules.

Beyond mechanical royalties, however, there’s also the matter of music inclusion within podcasts and videos. The NMPA has put Spotify on notice for its use of music within podcasts as well as its placement of lyrics within videos. Those fall outside of statutory law and require direct handshakes and authorizations to prevent direct infringement.

Here’s the full letter sent by Platt just hours ago.

Dear Songwriters and Composers,

I’m writing to share an important update regarding the mechanical royalties that Spotify pays you in the United States. 

Until recently, Spotify has been paying songwriters at the improved headline rate that was agreed upon in the last U.S. Copyright Royalty Board (CRB Phono IV) proceeding in 2022.

Late last year, Spotify added an audiobook offering to its premium subscription tier in the U.S. and across several other markets.  Spotify then unilaterally reclassified their subscription product as a bundle.  They claim this enables them to pay a reduced mechanical royalty rate. In effect, Spotify is taking the position that all U.S. subscribers are part of a bundle without choosing the bundle option.
 
Beginning with their March 2024 accountings, Spotify began to pay at the discounted rate that they claim they are entitled. This has the effect of reducing mechanical royalty payments to songwriters by approximately 20%. The reduction does not currently impact royalties outside of the U.S.

We do not agree with Spotify’s position.  While the CRB rate structure allows for a discounted bundle rate in certain circumstances, we do not believe this offering falls within the parameters that were agreed in the last CRB proceeding.

Yesterday, the Mechanical Licensing Collective (MLC) filed a lawsuit in Federal Court in New York City challenging Spotify’s actions.

We are working with the National Music Publishers’ Association (NMPA) and considering all options to enforce the improved rates that were achieved in CRB Phono IV. In addition, earlier this week the NMPA sent a letter to Spotify putting them on notice that there are unlicensed videos, lyrics and podcasts on its service, an important step to ensure that songwriters are being paid properly across all aspects of Spotify’s platform.

I will continue to reach out directly with important updates as they come.

Jon Platt

Chairman & CEO, Sony Music Publishing