Spotify Fires Back Against the MLC’s Amended Bundling Lawsuit

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It turns out Spotify isn’t happy about facing the Mechanical Licensing Collective’s revived bundling lawsuit. Now, the DSP has fired back against the amended complaint, which is allegedly “unsupportable by the facts” and “as baseless as the one that this court already rejected.”

Spotify answered the action today, two weeks and change following the MLC’s jury demand. And the latter, for its part, arrived after the presiding judge in late September agreed to let the case – which had been dismissed with prejudice in January – resume with a couple fresh arguments.

Long story short, the original complaint challenged Spotify’s actual bundling classification of Premium – a classification that, many are now aware, is very significant from the compositional-royalties perspective.

But upon tossing the suit, the court emphasized that “audiobook streaming is a product or service that is distinct from music streaming and has more than token value” – and that “Premium is, therefore, properly categorized as a Bundle.”

Enter the revamped claims of the MLC, which is litigating over the “artificially inflated” $9.99 price point attached to Spotify’s audiobooks offering and over the alleged presence of music in the audiobooks-only plan.

(A worthwhile side note before diving into Spotify’s retort: The Latham & Watkins-repped platform’s initial win was and apparently still is being touted as a big deal in the legal world. January brought a bit of law-trade praise for the appropriate attorneys, who are currently in the running for the Financial Times’ “Innovative Lawyers in Disputes and Litigation” award.)

Back to Spotify’s answer, the response rather unsurprisingly begins by reiterating the MLC’s “decisive defeat on the central issue that prompted this litigation.”

“The law is settled: Spotify is entitled to pay royalties on Premium to MLC based solely on the portion of subscription revenue attributable to music,” the legal text spells out before taking aim at the plaintiff’s “two peripheral issues…both of which are unsupportable by the facts.”

“But $9.99 is, if anything, a conservatively low price,” the answer proceeds with regard to the first of the two issues. “Of the audiobook subscriptions in the market that give access to the equivalent range of bestsellers available on Spotify, none can be purchased for less than $9.99, and most cost much more.

“The least expensive of the audiobook services cited by MLC in its Amended Complaint, Amazon’s Audible Plus, is $7.95, and it gives access to virtually no bestsellers.

Furthermore, “[n]o other subscription audiobook service in the U.S. of which Spotify is aware costs less than $7.95 per month. What this means is that the least that the audiobook component of Spotify Premium could conceivably be valued at, consistent with the law, is $7.95 per month.”

(As the MLC will almost certainly point out, Audible Plus does, however, offer subscribers unlimited listening, whereas Spotify’s Audiobooks Access plan is capped at 15 hours per month. Also, what exactly constitutes a “bestseller,” especially in the audiobooks space?)

In any event, the way the defendant sees things, “even if Spotify were to use $7.95 as the standalone price in the Bundle calculation (which it should not), the result would be an extremely small percentage increase in royalties paid to the MLC.”

A similar defense is front and center when it comes to the second of the MLC’s above-highlighted arguments, pertaining this time to music’s availability via the audiobooks-only tier and the corresponding alleged obligation to cough up royalties.

“The music component of Audiobooks Access is Spotify Free, which is a nonsubscription music offering that is given free to any consumer. Therefore, there is no plausible argument that ‘Audiobook[s] Access’ could in fact be a ‘Bundle’ under the existing regulations.

“But even if MLC’s theory could be correct, the royalties at stake with respect to this issue, even if they could be properly calculated, would be miniscule—a drop in comparison to the ocean of royalties Spotify pays to the MLC,” the answer reads.

“Ultimately, despite public statements by MLC and publisher representatives to the contrary,” the document drives home, “MLC’s remaining claims would not result in any dramatic increase in royalty payments to songwriters and publishers… All of this raises serious questions about MLC’s motivations in continuing to spend resources on this litigation.”