Spotify’s Bundlegate: $230 Million in Lost Royalties

Spotify’s reclassification of premium music subscriptions as “bundles” has resulted in an estimated $230 million in lost U.S. mechanical royalties for songwriters. Critics argue this move, tied to limited audiobook access, was a deliberate strategy to reduce payouts and boost company profits. The ongoing dispute highlights a major injustice in the streaming era.

The air in the music industry feels heavy, thick with a familiar tension.

It’s been a year since Spotify, the titan that has arguably reaped more from the creative wellspring of songwriters than any other entity, quietly shifted a few lines of code and, in doing so, siphoned off hundreds of millions of dollars from the very artists whose work fuels its empire.

This isn’t just another royalty dispute; it is, as one seasoned observer puts it, “one of the greatest injustices visited upon songwriters in the era of music streaming.” [source]

The saga, now dubbed ‘Bundlegate’ by its victims, began subtly in November 2023 with the introduction of limited audiobook functionality to Spotify’s premium tiers. [source]

The real seismic shift, however, occurred in March 2024.

Without fanfare, Spotify began reporting its premium subscriptions to the Mechanical Licensing Collective (MLC) not as “standalone portable subscriptions” – which they fundamentally remained for most users – but as “bundled subscription services.”

This seemingly technical reclassification had a devastating financial consequence.

The National Music Publishers’ Association (NMPA) recently confirmed the grim tally: a staggering $230 million in U.S. mechanical royalties evaporated in the first year alone. [source]

Spotify’s own SEC filings corroborate a loss of 205 million euros for the 13-month period ending March 31, 2025.

This isn’t theoretical money or projected earnings; this is cold, hard cash that should have been flowing into the pockets of songwriters and music publishers, yet it remains firmly ensconced within Spotify’s coffers.

The MLC, recognizing the profound implications, sued Spotify in May 2024. [source]

But in a move that underscored the formidable legal might of the streaming giant, a judge dismissed the case in January 2025, leaving a motion for reconsideration pending in the Southern District of New York.

The legal battle may be stalled, but the moral outrage, and the financial bleeding, continue unabated.

Adam Parness, a former global head of music publishing at Spotify himself, and now a trusted advisor to rightsholders, has been a vocal critic from the outset.

He foresaw this outcome with chilling accuracy.

A year ago, he predicted Spotify’s actions would slash the effective share of U.S. subscription revenue paid to creators from the agreed-upon 15.1-15.35% (under the Phonorecords IV settlement) to less than 12%.

He suggested the timing was engineered to deny songwriters the benefit of impending price increases.

He even posited that the Spotify Audiobooks Access tier, launched only in the U.S. and nowhere else, was a mere legal prop, a smokescreen to justify the reclassification.

A year later, Parness declares, his dire predictions have proven tragically true.

So, what exactly constitutes a legitimate bundle?

In a fair market, a bundle combines music with other goods or services for a single price, where each component typically has independent commercial value and can be purchased separately.

Rightsholders might agree to reduced royalty terms, or “bundle discounts,” if the package promises to attract new users or additive revenue that wouldn’t otherwise materialize for music alone.

It’s a calculated risk, a shared investment in expanding the market.

But Spotify’s maneuver, Parness argues, bears no resemblance to this equitable model.

This isn’t about fostering new markets; it’s about retroactively redefining an existing one to reduce payouts.

Spotify built its colossal music subscription empire on the backs of songwriters.

To then declare that these same premium music subscriptions are now “bundles” – merely because a token 15 hours of audiobook listening was tacked on – is to suggest that songwriters now contribute less to Spotify’s success.

This could not be further from the truth.

Consider the damning evidence: In June 2024, Spotify launched “Spotify Basic,” a music-only tier that mirrors the original premium service before the audiobook addition.

It costs $1 to $3 less.

Yet, this option is a ghost in the machine.

It’s only available to existing premium users who subscribed before June 20, 2024.

New subscribers cannot access it.

Its promotion has been virtually non-existent.

Cancel it, and you can’t resubscribe.

Want to upgrade from a Basic Individual to a Basic Duo? Forget it; you’re forced into the more expensive Premium Duo, audiobooks included, whether you want them or not.

The message is clear: music alone remains the primary draw, yet the option for a music-only plan is systematically suppressed.

And what of the standalone Spotify Audiobook Access tier?

Launched solely in the U.S., it appears to be little more than a phantom offering, unpromoted and with no publicly reported subscriber numbers.

Its very existence, Parness contends, was solely to lend legal and pricing benchmarks to the bundling strategy.

The company’s past decision not to declare podcasts a bundle, despite their inclusion for years, further highlights the cynical nature of the audiobook integration.

Podcasts are ad-monetized; audiobooks, by contrast, carry direct costs that Spotify seemingly sought to offset by shifting the burden onto creators.

The financial impact on Spotify itself is equally telling.

The company’s premium gross margin jumped from 29.1% in Q4 2023 (the last full quarter before the bundling effect) to 33.5% in Q1 2025.

The $230 million in withheld royalties, while a colossal sum for creators, represents a material 1.4% of Spotify’s global premium revenue.

This reduction, as Spotify has acknowledged on earnings calls, has been a significant contributor to its improved financial performance and, consequently, its stock price, which has surged by approximately 130% year-over-year.

It is a perverse irony that songwriters and music publishers have inadvertently fueled this market triumph, finding themselves not only unrewarded but actively penalized.

Their creative output, the very bedrock of Spotify’s business model, is being leveraged to subsidize the company’s new ventures and boost its bottom line.

So, where do creators go from here?

While some major publishers like Universal Music Publishing Group and Warner Chappell have reportedly secured direct deals with Spotify, the broader community faces a crucial juncture.

The upcoming Phonorecords V process before the Copyright Royalty Board, set to begin early next year, presents a vital opportunity to rectify this profound injustice. [source]

For every songwriter, every publisher, and indeed, anyone who relies on the precarious ecosystem of music royalties for their livelihood, staying informed and engaged is not merely advisable; it is imperative.

The fight for fair compensation in the streaming era is far from over, and ‘Bundlegate’ stands as a stark reminder of the battles yet to be won.