Spotify has revealed it saved $49.89 million (€46 million) in mechanical royalties between March and June 2024 through its controversial bundle reclassification strategy in the U.S.

The streaming giant disclosed these figures amid an intensifying legal battle with the Mechanical Licensing Collective (MLC), which is suing for unpaid royalties. The savings stem from Spotify's March decision to reclassify nearly all U.S. accounts as bundles, citing the inclusion of both music and audiobooks in their offerings.

This reclassification significantly impacts how revenue is treated and royalties are calculated under the Phonorecords IV determination. The $49.89 million represents the amount Spotify would need to pay, excluding interest and penalties, if the MLC wins its legal challenge.

Key implications of this development:

• The savings align with initial industry estimates of reduced U.S. mechanical royalties
• Major labels are unlikely to pull their catalogs from Spotify, despite the controversy
• Universal Music's recent 23% stock price decline (following acknowledged slowing streaming growth) strengthens Spotify's position
• The situation demonstrates Spotify's significant leverage in the music industry, allowing it to maintain its strategy despite publisher opposition

While Spotify continues to defend its position aggressively, a settlement remains possible, as similar industry disputes have been resolved through negotiation in the past. However, the streaming platform's strong financial performance, including $290 million in Q2 operating income, suggests it can weather the controversy without significant impact on its bottom line or expansion plans.

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