Spotify sued over millions in allegedly unpaid music royalties

Spotify has been hit with a lawsuit in New York federal court that accuses the streaming giant of underpaying songwriting royalties for tens of millions of songs.

The lawsuit, filed late Thursday by the royalty-gathering nonprofit Mechanical Licensing Collective, said that Spotify underreported its revenue by nearly half in order to avoid paying millions of dollars that it owes to the group.

The complaint cites a Billboard report that estimates Spotify's move could cost songwriters nearly $150 million over the next year.

"Spotify paid a record amount to publishers and societies in 2023 and is on track to pay out an even larger amount in 2024," a Spotify spokesperson said in a statement on Friday. "We look forward to a swift resolution of this matter."

MLC chief executive Kris Ahrend said in a statement that the collective "takes seriously its legal responsibility to take action on behalf of our members when we believe usage reporting and royalty payments are materially incorrect."

U.S. law allows streaming services like Spotify to obtain a blanket "compulsory license" to copyrighted music at a specific royalty rate. The U.S. Copyright Office appointed MLC to collect royalties for songwriters and music publishers.

The group's lawsuit said that after adding audiobook access, Spotify incorrectly recharacterized its service in a way that would significantly reduce the amount of royalties it owed under the license, "even though there has been no change to [Spotify's] Premium plan and no corresponding reduction to the revenues that Spotify generates."

"Spotify's attempt to reduce its mechanical royalties has resulted in a clear breach of its obligations," the complaint said.

The MLC asked the court for an unspecified amount of monetary damages for Spotify's alleged unpaid royalties and late fees.

The case is Mechanical Licensing Collective v. Spotify USA Inc, U.S. District Court for the Southern District of New York, No. 1:24-cv-03809.

For the MLC: Jay Cohen and Darren Johnson of Paul Weiss Rifkind Wharton & Garrison

For Spotify: attorney information not yet available