Streaming giant Spotify has once again locked horns with the Mechanical Licensing Collective (MLC) over royalty payments, as the MLC prepares to file an amended complaint by October 2, 2025, following a surprising reversal in court proceedings.
The legal battle, which began in May 2024, centers on Spotify’s controversial decision to reclassify its Premium subscriptions as “bundles” that include 15 hours of audiobook content monthly, effectively reducing mechanical royalty payments to songwriters and publishers. Judge Analisa Torres initially dismissed MLC’s claims with prejudice in January 2025, ruling that bundling audiobooks with music streams was legally permissible under federal regulations.
The court determined that audiobooks constituted a distinct product of “more than token value,” which justified Spotify’s approach to calculating lower mechanical royalties. However, in an unexpected turn, Judge Torres granted MLC permission in September 2025 to file an amended complaint, acknowledging that their revised legal arguments presented multiple plausible claims.
While previously dismissing MLC’s claims, Judge Torres made a surprising reversal, allowing an amended complaint based on newly plausible legal arguments.
The dispute has sparked significant backlash throughout the music industry. Nashville Songwriters Association International characterized Spotify’s bundling strategy as a “gut punch” that undermines a decade of hard-won increases in mechanical royalty rates. According to MLC’s allegations, Spotify’s revised royalty structure has nearly halved mechanical payments to rights-holders, a claim Spotify vehemently contests. The federal judge’s decision directly contradicted MLC’s argument that Spotify’s bundle was not legitimate under existing regulations. The financial stakes are enormous, with potential royalties owed to MLC during the disputed period estimated at €256 million (~$290 million).
“This case fundamentally concerns defending rightful royalty payments to American songwriters,” stated an MLC representative, emphasizing the organization’s commitment to fair compensation for creators under Section 115 of the Copyright Act.
Spotify maintains that its payment structure complies with all federal guidelines, arguing that the intrinsic monetary value of audiobook streaming justifies its approach. The MLC, established by the Music Modernization Act, is responsible for administering blanket mechanical licenses for digital music services in the United States. This legal conflict highlights the importance of sync deals as an alternative revenue stream that many musicians rely on when streaming royalties become unpredictable. The company has dismissed the amended complaint as baseless, setting the stage for continued legal wrangling.
The ongoing dispute highlights broader tensions between streaming platforms and rights organizations over royalty calculation methodologies, transparency, and fair compensation. Industry observers note that the outcome could establish significant precedents for how digital streaming services structure their offerings and compensate creators in an increasingly bundled marketplace.
