In June,National Music Publishers’ Association (NMPA) executives reportedat the organization’s annual meetingthat U.S. music publishers and their songwriters have missedout on nearly $500 million in mechanical royalty payments since Spotify and Amazon rolledall of their paid music subscribers into bundledplans.In the wake of that announcement,Billboard analyzed Spotify’s reports to the Mechanical Licensing Collective for the fourth quarters of 2023 and 2025 and found that the blendedper-stream mechanical rate from its subscriber tiers decreasedby about 51%, while overall dollar payments for that license declined about 45%.
While publishers tend to look at total publishing payments for their repertoire, songwriters and artists tend to look at per-stream rates as well. With that in mind, Billboard took into account both parameters and — specifically looking at Spotify paid subscriber tiers — found thatthe mechanical per-stream pay rate declined51%, from about $0.00068 per stream in Q4 2023 to about $0.00033 per stream in Q5 2025. Meanwhile, the mechanical dollar amount paid by Spotify decreased45%,from about $97.3 millionin Q4 2023to about $53.3 millionin Q4 2025, using roundednumbers.
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The reason for the above percentage discrepancy is due to the fact that the number of subscribers and the amount of streams each subscribergeneratedevery month increased between the two periods, resulting in theoverall number of streams growing by nearly 19.3 billion streams —fromnearly143.6 billionstreamsby Spotify subscribers in Q4 2023 to nearly 162.9 billion in Q4 2025.
All the above data is mainly basedon calculations suppliedby the law firm Manatt Phelps & Phillips, which compiles the Manatt Music Streaming Royalty Calculator,and was verifiedby Billboard, which compiledits own spreadsheets basedon Spotify streaming reports to the Mechanical Licensing Collective for the citedtime periods. (Forthis story,Billboard isspecifically focusing on Spotify; while Amazon also uses bundling,which has similarlyresultedin smaller mechanical payments, the lossesare much smaller than thelost payments from Spotify.)
According to Spotify’s own financial 6-K statement for the period ending March 31, 2026, the company acknowledgedit had a potential 410 million euros ($471 million) liability for the period of March 1, 2024, when it rolledout bundling, through March 31, 2026, if an amendedlawsuit by the Mechanical Licensing Collective on the issue proves successful.
Moreover, the mechanical payment issue for bundledtiers is expectedto be a big one in the Copyright Royalty Board’s ongoing Phono V rate determinations—covering the period of Jan. 1, 2028, through Dec. 31, 2032 — which kickedoff in January of this year.
“What we’re seeing in the latest data should be a wake-up call for songwriters and publishers,” Manatt Entertainment group leader Jordan Bromley said in a statement. “Mechanical royalties — particularly on Spotify — have droppeddramatically over the past two years, not because music is being played less, but because of fundamental changes in how these royalties are calculated. But here is the good news: as we speak, songwriters, publishers and DSPs (including Spotify) are in negotiations for new rates. Now is the time to set the record straight and ensure a future for working songwriters in the UnitedStates.”
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While publishers and songwriters may have missedout on a chunk of revenue over the two-year period covering 2024 and 2025 due to bundling, beginning in 2026, Spotify — after doing what sources say are direct deals with the majors and some large publishers for additional rights for video and lyrics — has also done direct deals via the NMPA and the Harry Fox Agency.According to sources, these dealsallow independent publishers to opt in and license those additional rights, which are not coveredby the compulsory mechanical license or the MusicModernization Act.
Those deals are so far generating bigger payments than expected, some independent publishers tell Billboard. One indie publisher suggests that the new licensing option carries the implication thatSpotifyisattempting to put some money back in the publishers’ and songwriters’ pockets on a“good faith basis.”However, another indie publisher says that’s too generous an assessment, because for that direct deal payment, Spotify is getting additional rights.However, he does agree that those payments somewhat offset the sting of the mechanical payments lost due to bundling.
According to an NMPA spokesperson, “While direct deals for video have helpedfill the almost half-a-billion-dollar hole from bundling, since those are completely different rights, the bundling deficit remains. Income from video should be on top of what Spotify must pay songwriters for interactive streaming — not instead of.”
Even as some publishers say they are somewhat mollifiedby the incremental payments from audiovisual licensing, they are still angry that Spotify unilaterally put then-existing music subscribers into a bundledtier with audiobooks that ultimately allowedit to reduce mechanical payments.
This bundling issue, as mentioned, will be front and center during the CRB Phono V rate determination. Or, as NMPA chief legal officer and COO Danielle Aguirre put it at the annual meeting, “We will be working hard at the Copyright Royalty Board proceeding to address the issues around DSP bundling and to make sure that regulations cannot be manipulated.”
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During her talk at the meeting, Aguirre brought up another way that bundling has hurt music publishers and songwriters. “What was in 2024 a DSP-wide royalty distribution of 55% mechanical to 45% performance has flippedto now 53% performance and 47% mechanical due solely to the bundling implementedby Spotify and Amazon,” she explained. “This is concerning because mechanical royalties, as you guys know, are paid through the MLC, and the MLC does not take out a commission or any fee from you for administration of mechanical rights…you are receiving 100% of them.”
During the Q4 periods examinedby Billboard, that switch is even more dramatic. While mechanical accountedfor nearly 55.4% of payments to publishers versus 44.6% for performance royalties by Spotify in Q4 2023, in Q4 2025, that had reversed to nearly 33.25% mechanical versus 63.75% performance royalties.
How does bundling allow Spotify to pay less in royalties?
First, let’s look at the complex multi-step formula for determining mechanical payments. Initially, the formula uses two prongs to determine what it calls the all-in pool for mechanical and performance royalties. (Performance licensing has been predeterminedoutside the mechanical process through rate negotiations between Spotify and the performance rights organizations, so that paid amount is a known quantity and reportedby Spotify in monthly reports for each of its tiers.)The all-in pool is the greater of either the headline rate (which in 2025 was 15.25% against total revenue) or the percentage of total content cost — the royalty Spotify pays to record labels — which is currently 24.50%.
Due to Spotify bundling, the first pool truncates total revenue because bundling allows a digital service provider to attribute revenue differently. So if a music subscription, for example, costs a subscriber $10 on a stand-alone basis and an audiobook subscription costs a subscriber $9 on a stand-alone basis (these prices are made-up to show the math), that means music revenue comprises 52.6% of total revenue, allowing the DSP to apply the 15.25% prong against a greatly reducedrevenue total.
Sources say that while the above dollar amount quotes prices as an example, the resulting percentage is spot on, noting that bundling allows Spotify to reduce total revenue from 100% to 52.6% of the total for that prong. That has an impact on the overall all-in pool. In 2023, the total revenue prong was dominant in the formula for the Spotify tiers, but in 2025, the total content pool turnedout to be the all-in prong the vast majority of timesdue to the aforementionedreduction in the revenue total.
That’s not all that impactedthe Spotify mechanical payments. Once the all-in pool has been established, the performance royalties are subtractedfrom that pool, and whatever is left creates a potential mechanical pool. But first, that pool is measuredagainst a pool createdby multiplying33 cents per qualifiedsubscriber for a bundledtier. This pool is consideredthe rate floor, and whichever is larger becomes the mechanical payment.
What’s significant about this is thatin 2023,before Spotify unilaterally turnedpaid music subscriptions into bundledpools andithad eight tiers, of which seven were paid tiers, the floor pool never became the mechanical pool.Butin 2025, there were 20 tiers: 19 paid tiers and one-ad-supportedtier.Thismeans that over three months, in the 57 times that the final step of the mechanical formula was performedfor all of the paid tiers,the floor pool determinedthe mechanical paymentin 26 instances. While most of those instances involvedpaid tiers with small amounts of revenue, they didinclude the second- and third-largest paid tiers —respectively,the bundledFamily Audiobooks tier and the bundledDuo Audiobookstier.
While Spotify declinedto comment for this story, in the past it has pointedout that its global payments to publishers grow every year.
