Yahoo Finance Spotify Hit With FTC Complaint by Songwriters Association Over Royalties
(Bloomberg) -- The National Music Publishers’ Association, a trade group that represents music publishers and songwriters, filed a complaint with the US Federal Trade Commission on Wednesday about Spotify Technology SA’s decision to provide audiobooks to subscribers, which resulted in reduced royalty payments to songwriters.The audiobooks addition gave Spotify leeway to reclassify its premium subscription offering as a “bundle.” Under a complicated system set by the US Copyright Royalty Board, that qualifies Spotify to pay a discounted rate to songwriters since it’s now paying for the licensing of books and music under the same subscription price.
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The NMPA alleges in its complaint that the bundle is unlawful since subscribers were automatically rolled in, with no option to remain on a music-only tier, which doesn’t yet exist in the US. Payments to songwriters could drop by around $150 million over the next year as a result, according to the NMPA.
“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,” the NMPA said in a letter to FTC Chair Lina Khan. “If allowed to continue, Spotify’s conduct will cost consumers millions of dollars, undermine the music royalty system, and harm competition.”The NMPA also sent its complaint to 10 state attorneys general, including those in New York, Tennessee, California and Illinois, as well as several consumer advocacy groups, in an attempt to encourage state investigations and possibly class action lawsuits.
A spokesperson said Spotify’s approach to offerings and prices is standard in the industry. “We notify users a month in advance of any price increases and offer easy cancellations as well as multiple plans for users to consider,” the spokesperson said. “In short, we categorically reject the NMPA’s baseless accusations.”
Spotify’s bundling move has put it at war with music publishers. The Mechanical Licensing Collective, a royalty collection service, sued the streaming service over the issue last month. The group is asking a federal court in Manhattan to order Spotify to stop classifying premium subscriptions as a bundled service and to pay for lost revenue.
In response to the lawsuit, Spotify said it looks forward to a “swift resolution,” over terms that publishers and streaming services “agreed to and celebrated years ago.”
Separately, the NMPA also sent a cease-and-desist letter last month over products it claims are infringing on songwriters’ copyrights. The NMPA alleges music videos, lyrics and podcasts on the platform use copyrighted music without the proper permissions.
“Before Spotify’s ‘bundling’ betrayal, we may have been able to work together to fix this problem, but they have chosen the hard road by coming after songwriters once again,” David Israelite, chief executive officer of the NMPA, said in a statement at the time.
A Spotify spokesperson called the May letter a “press stunt filled with false and misleading claims.”
(Updates with comments from the company in the sixth paragraph.)
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