Spotify defeats US licensing group's lawsuit over royalties

By Blake Brittain

Jan 29 (Reuters) - Spotify SPOT.N convinced a New York federal judge on Wednesday to dismiss a lawsuit that accused the streaming service of underpaying songwriting royalties for tens of millions of songs.

U.S. District Judge Analisa Torres rejected a complaint from the royalty-gathering nonprofit Mechanical Licensing Collective, which argued that Spotify had misreported its revenue to avoid paying millions of dollars owed to the group.

A Spotify spokesperson said the company was pleased with the decision. Spokespeople and attorneys for the MLC did not immediately respond to a request for comment.

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

The MLC sued Spotify last year after the streaming service added audiobooks. The nonprofit said that Spotify had wrongly recharacterized its Premium service as a bundle of music and audiobook streaming in a way that would significantly reduce the music royalties it pays, even though there was "no change to [Spotify's] Premium plan and no corresponding reduction to the revenues that Spotify generates."

The complaint cited a Billboard report that estimated Spotify's move could cost songwriters nearly $150 million in the year following the change.

Torres ruled for Spotify on Wednesday, finding that the company had described its service correctly.

"Under the facts as alleged, audiobook streaming is a product or service that is distinct from music streaming and has more than token value," Torres said. "Premium is, therefore, properly categorized as a Bundle, and the allegations of the complaint do not plausibly suggest otherwise."

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: Alli Stillman, Sy Damle and Michael Bern of Latham & Watkins

Read more:

Spotify sued over millions in allegedly unpaid music royalties

(Reporting by Blake Brittain in Washington)

((blake.brittain@tr.com; +1 (202) 938-5713))