Spotify has revealed significant mechanical royalty savings from its recent U.S. account bundling reclassifications, amid an intensifying legal battle with the Mechanical Licensing Collective (MLC).

The streaming giant disclosed in a regulatory filing that it saved approximately $49.89 million (€46 million) between March and June 2024 through its controversial bundling strategy. This figure represents the amount Spotify would need to pay, excluding interest and penalties, if the MLC wins its ongoing lawsuit.

The savings stem from Spotify's March 2024 decision to reclassify nearly all U.S. accounts as bundles, citing the combination of music and audiobook offerings. This reclassification significantly reduces mechanical royalty payments under the Phonorecords IV determination.

Key points about the situation:

• The savings align with initial industry estimates of reduced U.S. mechanical royalties
• Spotify reported $290 million in Q2 operating income
• The company is actively defending against the MLC's lawsuit
• Major labels are unlikely to pull their catalogs despite the controversy
• The dispute highlights Spotify's significant leverage in the music industry

While a settlement remains possible, Spotify's strong financial position and the major labels' dependence on streaming revenue suggest the company can maintain its bundling strategy without facing significant repercussions. This situation underscores the platform's growing influence in the music industry, even as it faces opposition from publishers and rights holders.

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