Sony Music Publishing is threatening action against Spotify over recent royalty reductions tied to the platform's subscription bundling strategy. This follows a lawsuit from the Mechanical Licensing Collective (MLC) and a cease-and-desist from the National Music Publishers' Association (NMPA).

Sony Music Publishing CEO Jon Platt outlined the key issues in a letter to songwriters and composers:

• Spotify added audiobooks to its premium subscription tier and reclassified their subscription product as a bundle
• The platform began paying reduced mechanical royalty rates (approximately 20% lower) starting March 2024
• These changes currently only impact U.S. royalties
• Sony disputes Spotify's interpretation of the CRB rate structure regarding bundle discounts

The conflict centers on whether Spotify's bundling strategy complies with the Phonorecords IV agreement governing mechanical publishing payouts. While Spotify maintains its actions are within agreed terms, publishers strongly disagree.

Key Developments:

• The MLC has filed a federal lawsuit in New York City challenging Spotify's actions
• NMPA has notified Spotify about unlicensed videos, lyrics, and podcasts on its platform
• Publishers may have limited options for content removal due to statutory and compulsory licensing rules
• Non-mechanical royalty issues (podcasts, videos) fall outside statutory law and require direct authorization

Sony Music Publishing is working with the NMPA to explore all options for enforcing the improved rates achieved in CRB Phono IV, while monitoring the ongoing legal proceedings between Spotify and the MLC.

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