Breaking news: Sony Music Publishing “considers all options” against Spotify following MLC lawsuit, NMPA warns

Digital Products Music publishing giant Sony Music Publishing is now threatening to sue Spotify over the unwelcome reduction in royalties.

Spotify just hit another big bear following its move to bundled subscription packages and the conveniently lower publishing royalty payments that come with it. According to internal communications leaked to Digital Music News early on Friday (May 17), Sony Music Publishing head John Platt is not in an optimistic mood following Spotify’s maneuver and is determined to take action. It is said that there is a possibility of causing

as ifLawsuit from Mechanical Licensing Collective(MLC) and the National Music Publishers Association aren’t enough, so Pratt is now promising to keep all options on the table.

In a letter sent today to member songwriters and composers, Mr. Pratt briefly explained the issue and future actions. “We are working with the National Music Publishers Association (NMPA) to consider all options to implement the improved rates achieved with CRB Phono IV,” Pratt said.

“Furthermore, earlier this week, the NMPA sent a letter to Spotify informing them of the presence of unauthorized videos, lyrics, and podcasts on the company’s service. This is an important step in ensuring that songwriters are not adequately compensated on all aspects of Spotify’s platform.” This is an important step in ensuring that people are paid.”

Early this morning, Spotify told DMN:Strongly oppose the MLC lawsuit. The platform is referring to the recently signed “Phonorecords IV” agreement governing mechanical publishing payments, which includes provisions regarding bundling.

” [MLC] The lawsuit concerns terms agreed to between publishers and streaming services.and celebratedSeveral years ago, under the Phono IV agreement,” Spotify emailed DMN, linking to a “congratulatory” announcement issued by the National Music Publishers Association (NMPA) at the time.

Platt and Sony Music Publishing see the problem differently. “We disagree with Spotify’s position,” Pratt said. “While the CRB rate structure allows for bundled rate discounts in certain circumstances, we do not believe this proposal falls within the terms agreed in the previous CRB proceedings.”

Separately, talk in the music industry is currently focused on whether a “nuclear option” might be next.

But unlike Lucien Grainge’s courageous withdrawal from TikTok, music publishers may not be able to unilaterally withdraw their content. First of all, Spotify and Mechanical Licensing Collective (MLC) are currently embroiled in a legal battle, with a court deciding whether the law and the contacts were violated. Spotify has a good chance of becoming popular. This means that publishers will no longer be able to remove content under statutory and compulsory licensing rules.

However, beyond the mechanical royalties, there is also the issue of including music in podcasts and videos. NMPA warned Spotify over the use of music in podcasts and the placement of lyrics in videos. These are outside the scope of statutory law and require a direct handshake and permission to prevent direct infringement.

This is the full text of the letter Pratt sent me a few hours ago.

Dear songwriters and composers,

We are writing to share important updates regarding mechanical royalties paid by Spotify in the United States.

Until recently, Spotify had been paying songwriters at the improved headline rate agreed to in the last U.S. Copyright and Royalty Board (CRB Phono IV) proceeding in 2022.

Late last year, Spotify added audiobook offerings to its premium subscription tier in the US and several other markets. Spotify then unilaterally reclassified its subscription products as bundles. They claim this will reduce mechanical royalty payments. Effectively, Spotify has taken the position that all subscribers in the US are part of the bundle even if they do not select the bundle option.

Beginning with the March 2024 accounting, Spotify began paying at the discounted rate it claimed it was entitled to. This has the effect of reducing mechanical royalty payments to songwriters by approximately 20%. At this time, this reduction does not affect royalties outside the United States.

We disagree with Spotify’s position. Although the CRB’s fee structure allows for bundled rate discounts in certain circumstances, we do not believe that this proposal falls within the parameters agreed in his previous CRB proceedings.

Yesterday, the Mechanical Licensing Collective (MLC) filed a lawsuit in federal court in New York City challenging Spotify’s actions.

We are working with the National Music Publishers Association (NMPA) to explore all options to achieve the rate improvements achieved with CRB Phono IV. Additionally, the NMPA sent a letter to Spotify earlier this week informing it of the presence of unauthorized videos, lyrics, and podcasts on its service. This is an important step in ensuring songwriters are properly compensated across all aspects of Spotify’s platform.

We will contact you directly if there are any further important updates.

John Pratt

Chairman and CEO, Sony Music Publishing