The Mechanical Licensing Collective (MLC) has filed a lawsuit against Spotify over royalty underpayments related to the streaming platform's recent bundling reclassification. The dispute centers on Spotify's decision to reclassify its standard $10.99 monthly subscription plans as bundles.

Key Points of the MLC's Arguments:

• Spotify's Premium plan isn't a true bundle because it hasn't changed from its original offering
• The reclassification could result in a $150 million annual decrease in mechanical royalty payments
• Under Phonorecords IV, bundled plans pay 24.5% of "total content cost" versus 26.2% for music-only plans

Main Contentions:

1. Premium Service Unchanged

• The MLC argues that Spotify Premium remains identical to its pre-audiobook service
• No new elements were actually bundled with the existing service

2. Bundling Requirements

• The MLC contends that a true bundle must include at least two distinct products
• They argue Spotify's $9.99 audiobook-only plan still provides unlimited music access

3. Token Value Issue

• Even if considered separate products, the audiobook component doesn't exceed "token value" required for bundle classification under Section 115

Relief Sought by MLC:

1. Declaration that Spotify's bundle classification violates Section 115
2. Compensatory damages for unpaid royalties
3. Late fees and attorneys' fees
4. Preliminary injunction against the reclassification

The case remains ongoing, with Spotify contesting the allegations and multiple industry organizations, including Sony Music Publishing, threatening additional legal action.

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