Photo Credit: Ri Ya
Here’s a music industry newsflash: everybody hates Spotify’s cut-rate ‘bundled’ royalty payments — except for Spotify. Six-year-olds enjoy cauliflower more, but now that Spotify just whipped the Mechanical Licensing Collective (MLC) in court, is there anything music publishers can do about it?
This is not just a topic of spirited industry conjecture, but a matter that could potentially reshape the music industry in 2025. But where do music publishers and songwriters go next?
For starters, NMPA chief David Israelite, music publishers, and The MLC may appeal this decision, even if that means losing again. This wasn’t a close case, but it’s the principle of it. However, according to sources eyeing this chess match, the court system is only one battleground, with legislation another vital arena for publishers.
After all, the legislative branch (not to mention the President) approved the landmark Music Modernization Act and created the MLC and its many rules — which included vast indemnifications and protections against licensing litigation for Spotify and other DSPs. You’re welcome Spotify, though rules can be changed and updated, especially when enough special interests want to make it happen.
There’s also the matter of David Israelite, who is almost certainly not walking away from this fight. Speaking of legislation: Israelite was just recently lobbying for across-the-board direct publishing deals last year. For now, however, Spotify gets to send out its discounted mechanical royalty checks after ramping up its US-based bundled subscriptions past 99%, as first tracked by DMN Pro.
But what happens when music publishers are finally sick of cashing those checks?
Previously, all indications were that major label bosses wouldn’t be intervening in publishing-specific disputes, at least in a meaningful way. But those assumptions were incorrect. Enter Universal Music Publishing Group (UMPG), which corralled its bigger brother parent to force Spotify to pay more and modify its cut-rate payouts.
Now, the hundreds-million-dollar question is what happens next — and more importantly, who rattles the cage demanding a direct licensing relationship.
Under US Copyright Law, any direct deal supersedes a statutory one. So who’s next to demand a direct deal to shutter the bundling loophole?
We don’t have the specific deal terms of the UMPG direct deal. But it’s certainly not worse than what Spotify was paying before. Big deals with UMG tend to set templates for smaller deals, which means that Spotify might end up paying more money to more music publishers than they did pre-bundling via direct deals and demands.
Net-net on a royalty-revenue basis, it’s hard to predict whether Spotify actually wins or loses here. But back at Spotify HQ, life is good: the stock is soaring, and Spotify’s brass are filthy rich. So who cares if a few publishers get stepped on?
This is reminiscent of TikTok’s scorched-earth licensing approach, though Spotify’s hearts-and-minds problem could spell trouble down the line. Already, we’re seeing more fallout, with songwriters boycotting Spotify’s songwriter-themed Grammy party (which itself got canceled).
(As a quick aside, there’s a reason why few in the music industry are advocating for TikTok as it struggles to remain in the US.)
It’s also important to note that Apple Music could easily ‘pull a Spotify’ and flip their subscriptions into bundles overnight. But they aren’t doing that according to DMN Pro’s research on bundling. But will major label and publisher bosses reward Cupertino for ‘doing the right thing’ and paying more to rights owners — even if they technically don’t have to? Others are also playing far more cooperatively than Spotify, and deserve to be rewarded with more exclusives, access, and other perks that come with friendlier partnerships.
Perhaps Spotify foolishly wants to have it both ways. But it’s hard to be the villain and the savior at the same time.
Spotify wants you to believe that they saved the music industry, and they’re pumping billions in found money into the industry ecosystem (we’d know, being on the receiving end of their PR machine). That assessment isn’t entirely incorrect, though for a company trying to shake its image of screwing artists and songwriters, bundling loopholes wasn’t the smartest idea.
Even today, prominent artists like Björk are landing zingers at Spotify over their measly royalties and artist-unfriendly practices. And she’s not wrong, either. Fresh data shows that Apple Music is the better industry partner, with better payouts to rights owners and creators. Whether it’s fair or not, Spotify remains the villain to many, and the shift to bundling isn’t helping.
More as this develops.
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Sadly, the structure of the “settlement” in Phonorecords IV agreed to by the music publishing industry majors and their affiliated, astroturf “songwriter” organizations (and rubber stamped by the US Copyright Royalty Board over the objections of independent songwriters and composers) may go down as the worst deal in US music industry history. It will likely end up costing music creators at least $500 million in royalties and possibly more. $100 million was lost in 2024 alone. This is catastrophic to the American and global music community. Who will answer for it, if anyone, remains to be seen, but I suspect many will be seeking answers.
Could this simply be remedied in Phonorecords V?
“Spotify wants you to believe that they saved the music industry, and they’re pumping billions in found money into the industry ecosystem (we’d know, being on the receiving end of their PR machine). That assessment isn’t entirely incorrect, though for a company trying to shake its image of screwing artists and songwriters, bundling loopholes wasn’t the smartest idea.” Paul — Per the first comment, the industry (read: labels) did this. Spotify terms – rates and implementation – were not set by Spotify; it did not negotiate with itself. The labels were happy to take the billions in equity and advances. Royalties be damned. Artists and writers be broke.
Jody, I get that, labels took their lion’s share and publishers fought over the statutory scraps. But does that mean Spotify should have specifically exploited a loophole to pay them less?
That’s also a debate: Spotify wants to maximize profits and decrease costs like any company. And, especially with the court finding, it’s legal.
It’s a brutal game but Spotify wins. Just funny when they then hold up a sign saying, ‘we saved the music industry’.
The labels and Mr. Israelite negotiated the bundling language. It was not imposed on them. Out-lawyered perhaps? I don’t know. The labels are short-sighted and not particularly interested in anything but headlines — and cash to the corporate umbrella. Why shouldn’t Spotify gloat about this. The real way Spotify is insidiously undermining the spirit of the game is its playlist play — fake artists and tracks owned by them and thus siphoning off real royalties. You should do a piece on Liz Pelly’s “Mood Machine.”