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Music Publishers File Legal Complaint Against Spotify With Federal Trade Commission, Claiming ‘Unfair, Deceptive and Fraudulent Business Practices’

The National Music Publishers Assn. has filed a legal 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 to be a $150 million annual loss. Spotify has confirmed that a lower royalty will result, but claims that earnings for creators will continue to rise.

“Spotify has deceived consumers by converting millions of its subscribers without their consent from music-only subscriptions into ‘bundled; audiobook-and-music subscriptions, publicly announcing increased prices for those subscriptions, failing to offer an option for subscribers to revert to a music-only subscription, and thwarting attempts to cancel through dark patterns and confusing website interfaces,” the letter reads in part. “This bait-and-switch subscription scheme is ‘saddling shoppers with recurring payments for products and services they did not intend to purchase or did not want to continue to purchase.’ Indeed, it has all the red flags of problematic negative-option practices that the FTC has consistently warned companies about: (1) Spotify has failed to give consumers all material information about its subscription plans up front; (2) Spotify has billed consumers without their informed consent; and (3) Spotify has made it hard for consumers to cancel.

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“Spotify’s conduct is having profoundly negative effects on other market participants as well,” it continues. “Those participants include music publishers and songwriters, whom Spotify is harming by paying reduced royalties based on an assertion that its subscribers are now paying for content other than music. Spotify is also disadvantaging market competitors who are seeking to compete fairly. If allowed to continue, Spotify’s conduct will cost consumers millions of dollars, undermine the music royalty system, and harm competition. We ask the FTC to investigate and stop Spotify’s misconduct.”

Spotify’s head of music, Jeremy Ehrlich, addressed the issue vaguely last week when asked about it at the Canadian Music Week conference. “There is ongoing litigation, so there’s not too much that I can get into,” he said. “But overall, we think we can really create a ton of value in the audiobook world. It’s been static for a while. Spotify launched [its music] product, we’re great at it and we tend to remunerate creators really well. So we want to do that in audiobooks, much like we have in podcasts and music.

“In the U.S., a lot of the licensing on the publishing side goes through the [Copyright Royalty Board] process, which is once every couple years,” he continued. “The bundling discounts were heavily negotiated at the time of the previous CRB [rate meetings]. So we’re only doing what the contract says. That said, there’s a dispute, and our hope is that we can resolve it quickly. But we’ve invested a ton into songwriter and publishing tools. We’ve paid more and more songwriters every year. Our commitment is to continue doing that. Right now, we’re just having a dispute with the MLC [Mechanical Licensing Collective], which isn’t in the legal realm.”

Spotify is on track to pay publishers and societies more in 2024 than in 2023. As our industry partners are aware, changes in our product portfolio mean that we are paying out in different ways based on terms agreed to by both streaming services and publishers,” the statement reads. “Multiple DSPs have long paid a lower rate for bundles versus a stand-alone music subscription, and our approach is consistent.”

The final sentence is in reference to plans offered by Amazon — which offers its music streaming as part of its Prime service — Apple and others.

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

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

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