Federal Court Approves Spotify Request to Delay MLC Lawsuit Response — New Deadline Set for July 19th

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A federal judge has granted a request from Spotify to delay its response to a lawsuit filed by the Mechanical Licensing Collective. Photo Credit: Alexander Shatov

Two weeks back, the Mechanical Licensing Collective (MLC) sued Spotify over an alleged royalties underpayment stemming from bundling. Now, the presiding judge has granted the defendant’s request to delay its response.

Judge Analisa Torres today signed off on said request, thereby moving the deadline for Spotify’s response (possibly including steps towards a dismissal motion) from June 10th to July 19th. In an initial letter seeking the extension, the streaming service’s counsel communicated that the expanded follow-up window would “afford sufficient time for the parties to correspond and potentially narrow the issues raised.”

Beyond that description, it’s unclear exactly how Spotify intends to use the additional time, which could simply represent an opportunity to prepare its defense. In any event, with this stage of the dispute now set to unfold across the next 50 days, the alleged mechanical royalties underpayment at hand appears likely to continue absent an injunction. (DMN sources have indicated that the involved calculation changes went into effect in March.)

Factoring based on high-end estimates of the mechanicals falloff, which some believe will near $150 million per year, that comes out to $12.5 million monthly – or north of $20 million between now and the new response deadline.

Bringing the focus back to the legal battle itself, Spotify hasn’t hesitated to refute the claims and the overarching arguments against its embrace of bundles. In short, the streaming service has reiterated the strong support expressed by the National Music Publishers’ Association (NMPA) and others for the Phonorecords IV determination.

Set to run through 2027’s end, this determination encompasses, in the NMPA’s own words, changes to the “treatment of ‘bundles’ of products or services that include music streaming.” And as we’ve explored in detail, it’s these changes that Spotify, now equipped with a standalone audiobook package, has moved to capitalize on by reclassifying its main offerings as bundles.

Time will, of course, reveal the precise impact of prioritizing bundles, which remain a significant component of various streaming platforms’ business models. The potential for the MLC confrontation to make way for a wider industry disagreement should also be kept in mind. Earlier in May, Sony Music Publishing cryptically relayed that it was “considering all options” against Spotify.

Nevertheless, the odds of a showdown between Spotify and the broader industry still seem remote; Sony Music Publishing is, after all, part of Sony Music Entertainment, which draws a sizable portion of its revenue from streaming. But it goes without saying that the far-from-ideal situation is worth closely monitoring moving forward, particularly when it comes to Spotify’s response to the MLC complaint.