When this story is done and dusted, Spotify might ask itself, ‘When we bundled music and audiobooks to reduce the mechanical royalty rate for songwriters in the US, was it worth the hassle?’
In April, Spotify announced its controversial decision to reclassify its Premium tiers as ‘bundles’ by combining music and audiobooks.
The move resulted in Spotify paying a lower mechanical royalty rate in the US to publishers and songwriters.
Yet the world’s largest subscription music streaming service may not have anticipated just how fierce the opposition to its bundling decision would be from songwriters and publishers.
In the words of National Music Publishers’ Association boss David Israelite, speaking at the NMPA‘s Annual Meeting in New York today (June 12): “Spotify has declared war on songwriters. Our response shall be all-encompassing”.
To date, that “all-encompassing” reaction from the music publishing community has included:
- A legal threat sent to Spotify from the National Music Publishers Association over the service allegedly hosting unlicensed lyrics on its platform;
- A lawsuit launched against Spotify by the US-based Mechanical Licensing Collective (The MLC), which is suing SPOT for allegedly underpaying royalties to songwriters and publishers;
- The NMPA calling on Congress to update the copyright law in the United States to allow publishers to negotiate in a “free market” just like record labels.
Today, a new headache for Spotify has emerged.
At the NMPA’s Annual Meeting, David Israelite revealed that the organization has filed an official complaint against Spotify with the Federal Trade Commission for “alleged unlawful conduct by Spotify”, which the NMPA claims “is harming millions of consumers and the music marketplace”.
Yes: the NMPA has filed this new FTC complaint on behalf of consumers in the United States, rather than on behalf of the trade org’s publisher members.
Within the letter, obtained by MBW, and which you can read in full here, the NMPA alleges that “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”.
Elsewhere in the letter, the NMPA argues that “Spotify’s conduct is having profoundly negative effects on” music publishers and songwriters, whom, it alleges, “Spotify is harming by paying reduced royalties based on an assertion that its subscribers are now paying for content other than music”.
The letter adds: “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 has declared war on songwriters. Our response shall be all encompassing.”
David Israelite, NMPA
Israelite also revealed that the NMPA has referred this matter to the state attorneys general in Tennessee, New York, California, Colorado, Georgia, Connecticut, Illinois, Washington DC, North Carolina and Oregon. Israelite said that these particular US states have “a strong interest in protecting songwriters, and states with strong consumer protection state laws”.
“We are inviting these state Attorneys General to investigate this matter on behalf of the Spotify customers in their respective states, for violations of their state laws designed to protect consumers from this type of bait and switch practice,” said Israelite at the NMPA event today.
In addition, today, Israelite said that the NMPA has referred the matter to “several leading consumer advocacy organizations who we anticipate will object to consumers being mistreated in this way, including the National Consumers League, the Consumer Federation of America, Public Citizen, Consumer Action, and the Truth in Advertising organization”.
Addressing the audience at the NMPA’s Annual Meeting, Israelite said: “For anyone who thinks that this is overkill, welcome to OUR version of a bundle. We unapologetically will defend the rights of songwriters and music publishers, and this attack on songwriters ultimately will fail.”
He added: “Spotify knows that what it is doing is risky and problematic. But what they hope, is that the 44 million customers who never asked for, or wanted, an audiobook bundle will not go through the hassle of transitioning out of their higher-priced fake bundle to rejoin the plan they signed up for in the first place – a music plan.
“Spotify does have an exit ramp: reverse course. Based on the past I have no expectation that will happen. But it is not too late for them to do the right thing.”
In October, Spotify started offering 15 hours worth of audiobooks with its Premium plans for free, in other words, ‘bundling’ access to audiobooks with its Premium services.
Alongside its decision to classify its Premium music services as bundles because of the added audiobooks element, Spotify has also been making moves to offer different types of subscriptions focused on the different types of content it offers.
The company launched a $9.99 per month standalone audiobook tier in March in the US.
And on its Q1 earnings call on April 23, Spotify co-founder and CEO Daniel Ek confirmed that a new ‘music-only’ subscription tier is coming to the platform.
The new music-only tier, Basic Individual, quietly arrived in the UK this month. It costs £10.99 per month without access to audiobooks.
In the UK, Spotify’s Premium Individual tier, which includes 15 hours of audiobook listening per month, costs £11.99. Spotify increased the price of its flagship Premium subscription plan in the UK to £11.99 in April, up from £10.99.
The price point of the Basic Individual tier in the UK suggests that it will also cost $10.99 in the United States, when it eventually launches in the US.
Spotify also recently hiked the price of its individual Premium tier in the US, where it is going up by $1 per month to $11.99.Music Business Worldwide