On September 1, 2026, a federal judge declined to allow an early appeal of the ruling that Premium qualifies as a music-and-audiobook bundle. That left a favorable decision intact for Spotify USA Inc., the U.S. subsidiary of Spotify Technology S.A. (NYSE:SPOT).
The remaining dispute concerns the bill. The Mechanical Licensing Collective, or MLC, which collects certain music royalties for songwriters and publishers, alleges that subscription revenue is being allocated and reported incorrectly. A valid bundle can still produce a disputed royalty calculation.
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Bull Case
The January 2025 ruling recognized that the 15 hours of monthly audiobook listening included in the plans at issue had more than token value. Keeping that ruling intact supports the legal basis for treating music and audiobooks as separate components of one subscription.
For Spotify Technology S.A., the commercial opportunity is broader engagement. Audiobooks could give customers another reason to retain Premium and buy additional listening time. The economics would be strongest if those benefits exceed the added content costs.
Second-quarter results announced August 4 provide financial context. Spotify Technology S.A. reported 300 million Premium subscribers, up 9% year over year, and revenue of €4.8 billion, up 14%. Gross margin reached 33.4%, while operating income totaled €655 million. These group-wide results provide a profitable base for product investment.
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Bear Case
MLC alleges that the price of Audiobooks Access overstates the value of Premium’s audiobook component, reducing the revenue share attributed to music. It also challenges reporting and royalty payments for music included in Audiobooks Access, including its treatment alongside the free service.
The September 1 order also struck the subsidiary’s defense that MLC had unfairly singled it out for enforcement. The court concluded that alleged selective enforcement did not bar copyright enforcement.
Spotify Technology S.A. disclosed approximately €473 million of potential liability for March 1, 2024 through June 30, 2026 if MLC ultimately succeeds completely in challenging Premium’s classification as a bundle. Potential penalties and interest were unquantified, and direct publisher agreements would partially offset any liability.
That estimate concerns the original bundling challenge. The remaining calculation claims require separate quantification; the disclosed bundling estimate is neither an amount awarded nor an estimate specifically covering those claims. An unfavorable outcome on the calculation claims could increase past royalty obligations or future content costs.
Hedge Fund Sentiment
The filings available so far reflect positions held before Spotify Technology S.A. reported its second-quarter 2026 results. Insider Monkey’s database showed 112 hedge funds holding Spotify Technology S.A. at the end of 2Q2026, down from 123 funds three months earlier.
Conclusion
Spotify Technology S.A. retains an important legal foundation for its audiobook strategy. The investment question is how much subscription revenue ultimately supports music royalties and what remains after content costs. Rulings on the remaining claims, quantified royalty adjustments, and subsequent margin disclosures will show whether the strategy’s economics hold.
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This article is originally published at Insider Monkey.
