Spotify is now positioning itself as a champion and defender of book authors from “literary luminaries” to “up-and-coming writers who are finding their audience”. Or at least that is the implication of a new court filing from the streaming platform as it formally seeks dismissal of the lawsuit filed against it by US mechanical rights collecting society the MLC.
Spotify says that the arguments the MLC has presented in its lawsuit as part of the big bundling discount dispute are not only “nonsensical and factually unsupportable”, but also “devalue the contributions of the tens of thousands of book authors” whose work is now available on the streaming platform.
The MLC began legal action in May after Spotify decided to reclassify its standard premium music streaming subscription product in the American market as a music + audiobooks bundle.
That reclassification allowed Spotify to take advantage of a bundling provision that is part of the US compulsory licence for mechanical rights which is administered by the MLC, and significantly reduce how much money it has to pay to songwriters and music publishers when their music is streamed.
The MLC says that Spotify’s reclassification is just a gambit to be able to exploit what the collecting society sees as a loophole in the compulsory licence.
The whole issue hinges – as Spotify says in its new court filing – on whether or not the fifteen hours of audiobooks access per month that is now part of the main Spotify subscription has more than “token value”.
If it does, publishers and songwriters will lose out, but if the court decides that Spotify’s reclassification is fake, then it will be forced to continue paying publishers and writers at the same rates as before it applied the bundling discount, including making up the difference on everything that has been streamed since March this year, when the change was implemented.
Spotify argues that the creative output of the book authors whose work is now streaming as audiobooks, “is not merely of ‘token value’” but “highly valuable, both to consumers and our collective culture”. It then adds that this “unassailable, common sense proposition” should be accepted by the court to “end this meritless and wasteful litigation”.
For Spotify, this litigation is “wasteful” on two levels. Obviously, it doesn’t want to incur the costs of fighting a lawsuit. However, because the MLC’s operating costs, including legal costs, are paid for by the streaming services, Spotify is effectively paying to sue itself, partially underwriting the costs incurred by the MLC in this dispute.
As well as the huge cultural value that charging people to stream audiobooks apparently has, Spotify also points to the “robust commercial audiobook market” that “exists to the tune of billions of dollars a year”, as further demonstration of the value of audiobooks.
The MLC’s argument that audiobooks only have token value, continues Spotify, “denigrates” the work of not only book authors, but also book publishers “not to mention the work of narrators, sound engineers and others whose work goes into the creation of audiobooks”.
Spotify added fifteen hours of audiobook access to its premium subscription product in the US last November, initially at no extra cost. It subsequently added a dollar to the price of its main subscription product – now including audiobooks – while also making available a music-only subscription option without the audiobooks at the previous price point. It also now offers a standalone audiobooks subscription in the US, priced at $9.99.
All that reshuffling of its subscription products completed, Spotify then told the music industry that it would be capitalising on the bundling discount in the compulsory licence from March. The music publishers have been scathing of that decision ever since, positioning it as a cynical trick by Spotify, manipulating its subscription offerings to exploit a loophole in the compulsory licence to significantly reduce payments to publishers and songwriters.
After the MLC filed its lawsuit in May, Spotify sent a letter to the court in July, outlining its initial response. Responding to that in its own letter to the court, the MLC insisted that the crux of the case is not whether audiobooks have value in the abstract, but rather how much value can be assigned to audiobooks in the context of rolling them into a subscription product offered to customers who signed up for a music streaming service.
Spotify is adamant that the more generic assessment of the value of audiobooks in the abstract is required when applying the bundling discount in the compulsory licence, and that the MLC is simply engaging in “efforts to manufacture factual disputes”.
There are no factual disputes, concludes Spotify in its legal filing, asking the court to throw out the MLC’s lawsuit because the “MLC has failed to state – and cannot state” a clear and “plausible” argument for why Spotify’s reclassification should be stopped.