Music publishers file complaint against Spotify with FTC

The National Association of Music Publishers. filed a complaint with the Federal Trade Commission against Spotify, primarily to oppose its recent plan to bundle music and audiobooks, which will result in a lower mechanical royalty rate for songwriters and artists , estimated at an annual loss of $150 million. Spotify confirmed that a lower royalty fee would result, but says creators’ revenues will continue to increase.

“Spotify deceived consumers by converting millions of its subscribers without their consent from music-only subscriptions to “bundled” subscriptions; audiobook and music subscriptions, publicly announcing an increase in prices for these subscriptions, not offering subscribers the option to revert to a music-only subscription and foiling cancellation attempts through dark schemes and confusing website interfaces,” the letter reads in part. . “This “bait and switch” subscription system “charges buyers with recurring payments for products and services that they did not intend to purchase or did not want to continue purchasing.” Indeed, it presents all the red flags regarding the problematic opt-out practices that the FTC has consistently warned companies about: (1) Spotify failed to provide consumers with all important information about its subscription plans; (2) Spotify charged consumers without their informed consent; and (3) Spotify made it difficult for consumers to cancel.

“Spotify’s behavior also has profoundly negative effects on other market participants,” he continues. “These participants include music publishers and songwriters, who are being harmed by Spotify by paying reduced royalties based on the claim that its subscribers are now paying for content other than music. Spotify also puts market competitors who seek to compete fairly at a disadvantage. If allowed to continue, Spotify’s behavior will cost consumers millions of dollars, undermine the music royalty system, and harm competition. We call on the FTC to investigate and put an end to Spotify’s misconduct.

Spotify’s head of music, Jeremy Ehrlich, vaguely addressed the issue last week when asked about it at the Canadian Music Week conference. “There’s some litigation going on, so there’s not much I can address,” he said. “But overall, we think we can really create a tremendous amount of value in the audiobook world. It’s been static for a while. Spotify launched their music product, we’re good at it, and we tend to pay creators very well. So we want to do that in audiobooks, just like we do in podcasts and music.

“In the United States, a large portion of publishing licenses go through the (Copyright Royalty Board) process, which occurs every two years,” he continued. “Bundled discounts have been heavily negotiated in previous CRBs (tariff meetings). So we only do what the contract says. That said, there is a dispute and we hope to resolve it quickly. But we have invested heavily in composition and publishing tools. We pay more and more songwriters every year. Our commitment is to continue to do so. For now, we simply have a dispute with the MLC (Mechanical Licensing Collective), which is not a legal matter.

“Spotify is on track to pay publishers and companies more in 2024 than in 2023. As our industry partners know, changes in our product portfolio mean we pay in different ways depending on the terms agreed by both streaming services and publishers. “, we read in the press release. “Several DSPs have long paid a lower rate for packages compared to a standalone music subscription, and our approach is consistent. »

The last sentence refers to packages offered by Amazon – which offers its music streaming as part of its Prime service – Apple and others.

Spotify is revealing details of the nearly $4 billion paid to music publishers representing songwriters over the past two years in the “Loud and Clear” section of its website.

The move reflects a reorganization of the company’s plan offerings. On March 1, Spotify introduced the Audiobooks Access Tier, a new standalone offering for audiobook lovers in the United States. At $9.99 per month, this subscription gives listeners access to 15 hours of monthly listening from a catalog of more than 250,000 tracks. With the audiobook access tier, users can continue to listen to music and podcasts on Spotify’s free, ad-supported service.