On this Music Business Worldwide podcast, MBW founder Tim Ingham is joined by David Israelite, the President and CEO of the National Music Publishers' Association.

We probably don't need to ask you to guess which particular controversial topic Israelite and Ingham discuss.

Earlier this month, Spotify announced that it was changing the way it calculates mechanical royalty payments for songwriters and publishers in the US.

Spotify has re-categorized its Premium subscription tiers in the States as 'bundles,' enabling it to pay out a lesser mechanical royalty rate to songwriters than it would if said Premium tiers were classified as pure music services.

Spotify believes it is entitled to re-categorize these tiers as 'bundles' due to the fact that SPOT now offers access to music plus audiobooks.

The idea that 'bundled' services should be entitled to a lower mechanical royalty rate (vs. standard music subscription services) was enshrined in the so-called 'CRB IV' agreement/settlement between publishers and Spotify in the States, signed in 2022, and covering the years 2023-2027.

As David Israelite explains on this podcast, the NMPA is currently considering legal action against Spotify that would seek to undo the newly-lowered 'bundle' mechanical royalty rate on the service.

This isn't the first time that Spotify and songwriters have butted heads, of course: In 2019, the US Copyright Royalty Board (CRB) decreed that Spotify and other streaming services needed to increase the headline mechanical royalty rates they paid publishers and songwriters in the US for the period covering 2018-2022.

That decision from the CRB (in the so-called 'CRB III' process) followed a campaign of lobbying and general legal cajoling from the NMPA, on behalf of songwriters and publishers.

Spotify (and Amazon) subsequently appealed this ('CRB III') ruling, attempting to drive down the mechanical royalty rate they paid songwriters under US law.

The CRB, though, stood firm – and told the streamers they must increase their rate.

Now, with its 'bundle' reclassification under 'CRB IV', Spotify is once again attempting to push down the percentage of its revenue that it must, by law, pay to songwriters and publishers in its biggest market.

Will Spotify ultimately get away with it? Stay tuned.

As Israelite confirms on this podcast: "This will likely end up in a legal conflict..."

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