Spotify Bundles Slash Mechanical Per-Stream Rate by 51%, Costing Publishers Nearly $500 Million
In June, executives from the National Music Publishers’ Association (NMPA) revealed during their annual meeting that U.S. music publishers and songwriters have collectively lost nearly $500 million in mechanical royalty payments since Spotify and Amazon integrated all their paid music subscribers into bundled plans. Following this announcement, an analysis of Spotify’s reports to the Mechanical Licensing Collective for the fourth quarters of 2023 and 2025 indicated a significant decline in the blended per-stream mechanical rate, which dropped by approximately 51%. Concurrently, the overall dollar payments for this license decreased by about 45%.
Decline in Per-Stream Rates
While music publishers typically focus on total publishing payments for their catalog, songwriters and artists often concentrate on per-stream rates. This analysis revealed that the mechanical per-stream pay rate fell from about $0.00068 in Q4 2023 to approximately $0.00033 in Q4 2025. In dollar terms, the mechanical payments made by Spotify decreased from around $97.3 million in Q4 2023 to about $53.3 million in Q4 2025.
The discrepancy in percentages can be attributed to an increase in the number of subscribers and the volume of streams generated by each subscriber. The total number of streams surged by nearly 19.3 billion, rising from approximately 143.6 billion streams in Q4 2023 to around 162.9 billion in Q4 2025.
Impact of Bundling on Revenue
This data is primarily based on calculations from the law firm Manatt Phelps & Phillips, which compiles the Manatt Music Streaming Royalty Calculator. The findings were verified through spreadsheets compiled from Spotify’s streaming reports to the Mechanical Licensing Collective for the specified timeframes. While Amazon also employs bundling, the losses incurred from its practices are considerably less than those from Spotify.
According to Spotify’s financial 6-K statement for the period ending March 31, 2026, the company acknowledged a potential liability of 410 million euros (approximately $471 million) for the period from March 1, 2024, when it initiated bundling, through March 31, 2026, contingent on the outcome of an amended lawsuit by the Mechanical Licensing Collective.
Ongoing Negotiations and Future Implications
The mechanical payment issue for bundled tiers is anticipated to play a significant role in the Copyright Royalty Board’s ongoing Phono V rate determinations, which will cover the period from January 1, 2028, to December 31, 2032. Jordan Bromley, the leader of Manatt Entertainment, emphasized that the latest data should serve as a wake-up call for songwriters and publishers. He noted that mechanical royalties, particularly on Spotify, have dramatically decreased over the past two years, not due to reduced music consumption but because of fundamental changes in how these royalties are calculated. Bromley highlighted that negotiations are currently underway between songwriters, publishers, and digital service providers, including Spotify, to establish new rates.
Changes in Royalty Distribution
During the meeting, Danielle Aguirre, NMPA’s chief legal officer and COO, discussed the impact of bundling on music publishers and songwriters. She noted that the distribution of royalties has shifted from a 55% mechanical to 45% performance ratio in 2024 to a current distribution of 53% performance and 47% mechanical, solely due to the bundling practices implemented by Spotify and Amazon. Aguirre pointed out that mechanical royalties are administered through the Mechanical Licensing Collective (MLC), which does not deduct any fees for the administration of mechanical rights, ensuring that publishers receive 100% of those royalties.
The shift in royalty distribution is even more pronounced in the examined Q4 periods. Mechanical royalties accounted for nearly 55.4% of payments to publishers in Q4 2023, compared to 44.6% for performance royalties. By Q4 2025, this distribution had reversed, with mechanical royalties dropping to approximately 33.25% and performance royalties rising to about 63.75%.
Mechanisms Behind Reduced Royalties
The complex formula for determining mechanical payments involves multiple steps. Initially, it establishes an “all-in pool” for mechanical and performance royalties. This pool is determined by the greater of either the headline rate (15.25% against total revenue in 2025) or the percentage of total content costs (currently 24.50%).
Bundling allows digital service providers to attribute revenue differently, which truncates total revenue. For instance, if a music subscription costs $10 and an audiobook subscription costs $9, music revenue would comprise only 52.6% of the total revenue, allowing the DSP to apply the 15.25% prong against a significantly reduced revenue total.
Once the all-in pool is established, performance royalties are subtracted, and the remaining amount creates a potential mechanical pool. This pool is then compared against a floor pool created by multiplying 33 cents per qualified subscriber for a bundled tier. The larger of the two pools determines the mechanical payment.
In 2023, before Spotify converted paid music subscriptions into bundled pools, the floor pool never became the mechanical pool. However, in 2025, the number of tiers increased to 20, with 19 being paid tiers and one ad-supported tier. This change resulted in the floor pool determining the mechanical payment in 26 instances out of 57 calculations performed across all paid tiers.
Conclusion
While Spotify has declined to comment on this analysis, it has previously stated that its global payments to publishers have increased annually. The ongoing discussions regarding bundling and mechanical payments will likely shape the future landscape of music royalties.
As reported by www.billboard.com.
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Published on 2026-07-10 01:01:00 • By FAME Delivered News Desk