Spotify's Own Filing Says the Songwriter Bundling Fight Could Cost It $619 Million. That Number Keeps Climbing

Every three months, Spotify tells investors how much it could owe songwriters if it loses one lawsuit. Every three months, the number goes up. In the notes to its third-quarter 2026 financial statements filed with the U.S. Securities and Exchange Commission, Spotify put its potential liability in the Mechanical Licensing Collective's "bundling" case at about €538 million, roughly $619 million, Music Business Worldwide reported. That's up €65 million from the €473 million it disclosed for the second quarter.

Here's the fight in plain terms. In March 2024, Spotify started reporting its Premium subscription as a "bundle" of music and audiobooks. Mechanical royalties are the money songwriters and publishers get when their compositions are streamed, and the federal rules calculate them differently for bundled subscriptions. The MLC, which collects and distributes those royalties, sued in May 2024, arguing Premium isn't a bundle and Spotify underpaid.

So far Spotify is winning. U.S. District Judge Analisa Torres dismissed the original complaint in January 2025, holding that Premium is a bundle, MBW reported. On Sept. 1 this year she refused to let The MLC take an immediate appeal. "MLC has not met its burden to show that there is a 'substantial ground for difference of opinion,'" she wrote. The MLC's amended complaint, filed Oct. 1, 2025, now goes after how Spotify valued the pieces of the bundle and how it reported royalties for its Audiobooks Access plan. Summary judgment pre-motion letters are due Dec. 11.

The filing's own language is careful: "If the MLC were to ultimately be entirely successful in its claim alleging that Spotify's Premium Service is not a bundle, then the liability in relation to the period March 1, 2024 to September 30, 2026 would be approximately €538 million, plus potential penalties and interest, which we cannot reasonably estimate." It adds: "Any liability would be partially offset by direct deals with publishers." Since January 2025, Spotify has signed direct U.S. publishing deals with Universal Music Publishing Group, Warner Chappell, Kobalt, Sony Music Publishing and BMG, MBW reported.

Look at the slope. Spotify's first estimate, in July 2024, was €46 million. It hit €256 million by mid-2025, €410 million at the end of March 2026, €473 million at the end of June, and now €538 million. That's roughly €54 million to €65 million a quarter. In other words, the gap between what songwriters would get under a full-price reading and what Spotify actually pays keeps growing by about the same amount every quarter, according to Spotify's own estimates. The filing doesn't say what drove the latest jump.

My read, and it's my read: the bundling question is basically settled for now in Spotify's favor, so this isn't a number Spotify expects to pay. But it's the most honest number in the whole debate, because Spotify wrote it. The National Music Publishers' Association and the Nashville Songwriters Association International told the Copyright Royalty Board in the Phonorecords V rate case that Spotify has already taken "more than $500 million in mechanical royalties that should have been paid to songwriters and publishers," MBW reported. Spotify's filing doesn't dispute the scale. It disputes the law.

This matters for rap and R&B songwriters as much as anyone, since Premium streams of their songs are reported under the same bundle classification. Phonorecords V will set the mechanical rates for 2028 through 2032, which is where the bundling fight goes next.

What we still don't know: what drove the latest €65 million increase, how much of the exposure is already covered by the direct publisher deals, and whether the Copyright Royalty Board will change how bundles are treated in the next rate period.