FTC Receives Complaint from Songwriters Association Over Spotify Royalties

Spotify Sparks Controversy with Audiobook Addition

The National Music Publishers’ Association (NMPA) has initiated a formal complaint with the US Federal Trade Commission (FTC) against Spotify Technology SA regarding a recent move to include audiobooks in its subscription service. This has led to reduced royalty payments to songwriters. The reclassification allowed Spotify to classify its premium offering as a “bundle,” enabling it to pay a lower rate to songwriters under US Copyright Royalty Board guidelines.

Concerns Over Reduced Royalties

The NMPA claims that the new bundle system is illegal since users were automatically enrolled without a choice to remain on a music-only tier, which does not yet exist in the US. The association estimates that this could lead to a reduction of approximately $150 million in payments to songwriters over the next year. The NMPA has referred to this approach as a "bait-and-switch subscription scheme," asserting it results in recurring payments for services consumers did not intend or want to purchase. The complaint suggests this practice will cost consumers millions, disrupt the music royalty system, and harm competition.

Widespread Action Against Spotify

The NMPA has also escalated the issue by sending the complaint to 10 state attorneys general and several consumer advocacy groups, hoping to instigate state investigations and potentially class action lawsuits. In defense, a Spotify spokesperson stated that the company’s pricing and service structures are industry-standard. The spokesperson emphasized that users are notified a month in advance of price increases, with the option to cancel easily and multiple plans available for consideration. Spotify strongly denies the NMPA’s accusations.

Ongoing Legal Battles

This bundling strategy has intensified conflicts between Spotify and music publishers. Recently, the Mechanical Licensing Collective sued Spotify, demanding that the service cease its bundling classification and compensate for lost revenues. Spotify has expressed its anticipation for a quick resolution of the matter, referring to agreed terms that have been previously celebrated by both publishers and streaming services.

Additional Allegations

In a separate dispute, the NMPA issued a cease-and-desist letter to Spotify last month, accusing the platform of infringing songwriters’ copyrights. The NMPA alleges unauthorized use of music in videos, lyrics, and podcasts on Spotify. NMPA’s CEO, David Israelite, criticized Spotify for straining relationships with songwriters, citing the company's bundling decision as a significant betrayal. In response, a Spotify representative dismissed the cease-and-desist letter as a "press stunt filled with false and misleading claims."

Conclusion

The ongoing disputes highlight the tension between Spotify’s business strategies and the rights of songwriters and publishers. As the legal battles continue, the implications for the music and audiobook industries remain significant, with potential impacts on how digital content is licensed and monetized moving forward.