Spotify’s reclassification of premium music tiers as audiobook bundles has triggered a nearly $500 million shortfall in mechanical royalties for U.S. songwriters and publishers, a crisis that directly threatens the income of working creators in Black music and urban radio. The National Music Publishers’ Association (NMPA) confirmed at its annual meeting that publishers and their songwriters missed out on this massive revenue chunk solely because Spotify and Amazon lowered mechanical payment rates for bundled services. This shift is not about reduced music consumption but stems from fundamental changes in how royalties are calculated, forcing rights holders to demand immediate regulatory corrections at the Copyright Royalty Board.
Billions in Lost Value and Legal Liability
The NMPA’s claim, supported by calculations from law firm Manatt Phelps & Phillips, indicates that the bundling strategy has cost the industry nearly $500 million since March 2024. Spotify itself acknowledged a potential liability of 410 million euros ($471 million) in its financial 6-K statement for the period ending March 31, 2026, if the Mechanical Licensing Collective (MLC) prevails in its ongoing lawsuit. The MLC accused Spotify of underpaying royalties by nearly 50% due to this reclassification, arguing that the move cynically undermines settlement agreements and threatens the stability of previous negotiations. While Spotify insists its approach aligns with industry practices for bundled services, the NMPA has labeled the scheme an attack on songwriters and urged the Federal Trade Commission to investigate these unfair business practices.
Shifting Royalty Distribution and Future Rate Battles
The bundling issue has fundamentally flipped the royalty distribution landscape. In 2024, the industry saw a 55% mechanical to 45% performance split, but by 2025, that reversed to 53% performance and 47% mechanical solely due to Spotify and Amazon’s bundling. The disparity is even more dramatic in recent quarters; Q4 2023 showed 55.4% mechanical payments versus 44.6% performance, while Q4 2025 dropped mechanical payments to just 33.25% against 63.75% performance. This issue will be front and center during the Copyright Royalty Board’s Phono V rate determinations covering 2028 through 2032. NMPA chief legal officer Aguirre stated the organization will work hard to ensure regulations cannot be manipulated, emphasizing that income from video rights must be on top of, not instead of, interactive streaming payments. While some direct deals for video rights have generated additional payments, the NMPA maintains these do not offset the mechanical deficit created by bundling.
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