IP Law Daily, COPYRIGHT—S.D.N.Y. ‘Reconsideration of reconsideration’ is denied in battle over Spotify bundling practices, (Sep 29, 2025)

By Matthew Hersh, J.D.

The court did not err in allowing copyright holders to amend their complaint against the digital streaming giant.

The organization that collects digital streaming royalties on behalf of music publishers and songwriters sufficiently alleged that Spotify cheated it out of revenues by artificially inflating the value of the audiobooks component of a bundled offering that combined audiobook listening and music streaming, the federal court for Manhattan has held. The court, in giving the music collective leave to file an amended complaint with its allegations against Spotify, also rejected the digital streaming company’s argument, based on a new Supreme Court precedent, that the court should have stood by its earlier dismissal of the complaint with prejudice (Mechanical Licensing Collective v. Spotify USA Inc., No. 1:24-cv-03809-AT-KHP (S.D.N.Y. Sept. 25, 2025)).

The dispute arises out of Spotify’s entry into the market for audiobooks. The music giant announced in late 2023 that its premium subscribers—those paying $10.99 for unlimited ad-free music—would also have access to 15 hours per month of audiobook listing for no additional cost. Five months later, in March 2024, Spotify started offering U.S. customers an audiobook service called “Audiobooks Access”—offering the same 15 hours per month of audiobook listening, plus a more limited amount of music streaming—for the price of $9.99. Shortly thereafter, Spotify recharacterized its premium service as a “bundled” offering of music and audiobook and reduced its royalty payments for the music portion of the premium service by nearly 50 percent.

Songwriters and music publishers, smelling a rat, promptly filed a lawsuit. The complaint, filed in the name of the Mechanical Licensing Collective—the entity that is empowered to collect royalties from record labels and digital service providers on behalf of copyright owners of musical works—claimed that Spotify’s royalty structure violated the federal regulations that govern intra-industry payments for digital online music. Spotify did that, the complaint asserted, by using the $9.99 audiobook-only offering as a benchmark to determine the relative value of the music and audiobook components of its premium service, when in fact that audiobook-only offering had only a “token value” to consumers.

The lawsuit has gone through several rounds in the district court. In January of this year the court dismissed the complaint with prejudice, finding that while Spotify’s new consumer offering sounded “very little like what an ordinary consumer might imagine to be a ‘bundle,’” it did not constitute a “bundle” under Copyright Office regulations. Those regulations, the court noted, allow a provider that bundles music with another product or service to pay copyright owners only for the pro rata music portion of that service—even if that pro rata rate is less than what a standalone music service would bring in. Nor did it matter that Spotify’s decision to bundle a popular premium music service with a relatively low-demand audiobook service may have been “pretextual,” the court noted. While that argument had “intuitive appeal,” the court acknowledged, it was permitted under “the words of the regulation as they are defined.”

Several months later, however, the court gave at least a partial concession to the copyright owners. The court refused to reconsider its holding that the copyright owners—at least on the facts alleged in their initial complaint—failed to adequately plead a case against Spotify. But the court did reverse course on the question of whether the copyright owners could get another bite at the apple. Specifically, the court vacated the judgment against the copyright owners—in effect, reopening the case—to allow the copyright owners to seek leave to amend their complaint to allege two additional set of facts in support of its complaint. First, the court held, the copyright owners would be allowed to add additional details in support of their allegation that Spotify had failed to properly account for and pay royalties in connection with its Audiobooks Access. Second, the court held, the copyright owners would be allowed to add an allegation—hinted at in the original complaint, but not fully fleshed out—that Spotify had improperly used the price of the Audiobooks Access as a benchmark when calculating the royalties due in connection with the music portion of its premium service.

The court’s reversal led to additional filings by both parties. The copyright owners, following the court’s invitation, moved for leave to file an amended complaint. (The proposed amended complaint can be found here; a redline against the original complaint can be found here.) Spotify, in turn, asked the court to reconsider its decision allowing the copyright owners to tender another complaint, arguing that new Supreme Court precedent weighed in its favor. The two new pleadings lead to this opinion.

Reconsideration of vacatur holding. The court first refused to reconsider its decision to vacate the judgment. As noted above, the court first granted Spotify’s motion to dismiss and did so with prejudice—meaning that a final judgment was entered in Spotify’s favor. The copyright owners then filed a motion pursuant to Rules 59(e) and 60(b) (effectively the same thing as a motion for reconsideration, though by means of a different set of rules) asking the court to vacate the judgment and give them a chance to tender an amended complaint. The court, finding that the copyright owners had shown that they had plausible grounds for an amended complaint—and recognizing that they were acting in good faith and had not filed an amended complaint before—granted the requested relief and vacated judgment. But Spotify now argued that a new Supreme Court precedent, BLOM Bank SAL v. Honickman, 145 S. Ct. 1612 (2025), tightened the standards for vacating a judgment and required reconsideration of the court’s vacatur order—or in effect, reconsideration of the court’s reconsideration. Was Spotify correct? The court found that it was not.

Spotify had it wrong, the court found, because it failed to take into account the difference between Rules 59(e) and 60(b). Rule 59(e) allows a party to move to alter or amend a judgment up to 28 days after the judgment was entered. Rule 60(b), by contrast, allows a court—under a narrowed set of circumstances—to vacate a judgment at any time. In Blom, the court noted, the Supreme Court emphasized that the mere fact that a party had shown they could file a plausible amended complaint was not enough, on its own, to support a Rule 60(b) motion. But the copyright owners’ motion, the court emphasized, was filed under Rule 60(b) as well as Rule 59(e), the court noted—and Blom dealt only with the former and not the latter. Thus, the court concluded, notwithstanding Blom, its earlier vacatur of the judgment remained correct as a matter of law.

Leave to amend the complaint. Turning to the merits of the proposed amended complaint, the court found that the copyright owners should be allowed to file the complaint. An amended complaint is typically allowed, the court noted, unless it is delayed, dilatory, made in bad faith, unduly prejudicial, or futile. The court’s earlier vacatur order had found that it was not delayed or dilatory or prejudicial or in bad faith—so the only question here was whether the amended complaint would be futile. Reviewing the proposed pleading under the standard applicable to a Rule 12(b)(6) motion, the court noted, “it would not be futile to pursue the complaint because the [proposed amended complaint] states multiple plausible claims.”

Most importantly, the court found, the copyright owners had plausibly alleged that Spotify had improperly priced the audiobooks portion of its bundle in order to artificially lower its royalties on the music streaming portion. The copyright owners alleged, in their complaint, that Spotify’s use of $9.99 as the price point for the audiobooks portion was out of line with the real value of the audiobooks. The audiobooks portion of the bundle, the copyright owners noted, offered only 15 hours of audiobook listening per month. But competitors such as Audible and Kobo, the copyright owners alleged, both offered unlimited audiobook listening for less than $8 per month. These and other elements of the proposed amended complaint, the court noted, were enough to raise a plausible claim.

The Case is No. 1:24-cv-03809-AT-KHP.

Judge: Torres, A.

Attorneys: Dylan O. Smith (Wharton & Garrison LLP) for Mechanical Licensing Collective. Allison Levine Stillman (Latham & Watkins LLP) for Spotify USA Inc.

Companies: Mechanical Licensing Collective; Spotify USA Inc.

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