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Spotify Faces FTC Complaint From Music Publishers

Spotify

Spotify is facing an FTC complaint from music publishers and songwriters over royalties.

As Bloomberg News reported, the National Music Publishers’ Association (NMPA) filed the complaint with the Federal Trade Commission (FTC) Wednesday (June 13), alleging that the streaming audio platform’s decision to offer audiobooks to subscribers meant fewer royalty payments to songwriters.

The reason? Adding audiobooks allowed Spotify to reclassify its premium subscription offering as a “bundle.” Under the complex rules of the U.S. Copyright Royalty Board, that qualifies Spotify to pay a reduced rate to songwriters since it was now paying license of books and music under the same subscription price.

The NMPA argues that the bundle is illegal, as subscribers were never given the option to stay on a music-only tier, something not yet offered in the U.S. The trade group says Spotify’s decision could mean a $150 million drop in payments to songwriters over the next year.

“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, per the Bloomberg report.

“If allowed to continue, Spotify’s conduct will cost consumers millions of dollars, undermine the music royalty system, and harm competition.”

A spokesperson for Spotify told PYMNTS the NMPA’s claims were “baseless,” and that the company’s approach to pricing is typical of 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.

As PYMNTS noted when Spotify expanded its audiobooks offering earlier this year, these efforts come “as many consumers are streamlining their entertainment subscription commitments due to financial challenges.”

Joint research by PYMNTS Intelligence and Mastercard found that more than half of consumers said they would reduce their streaming subscriptions if they weren’t able to cover their monthly bills, exceeding any other service in terms of potential cuts.

In addition, findings from another study, “Subscription Commerce Readiness Report: Bridging the Gap Between Subscription Conversion and Retention,” a collaboration between PYMNTS Intelligence and sticky.io, found that cost is the key driver behind subscription cancellations, with nearly 60% of consumers saying it led them to discontinue a subscription in the prior year.