Songwriters, Music Publishers Lodge FTC Complaint Against Spotify

The trade group accuses the Sweden-based music streaming giant of underpaying royalties to artists while overcharging subscribers.
Songwriters, Music Publishers Lodge FTC Complaint Against Spotify
A smartphone in front of a screen projection of the Spotify logo taken on April 1, 2018. (Dado Ruvic/Illustration/Reuters)
Alice Giordano
Updated:
0:00

Spotify, the world’s largest music streaming platform, has been named in a federal fraud complaint by the largest group of songwriters in the United States.

The National Music Publishers’ Association (NMPA) alleges in a complaint to the U.S. Federal Trade Commission that Spotify is defrauding performing artists and customers alike by bundling audiobooks into its premium music packages.

The result is less music for subscribers and less lucrative “mechanical royalties” paid to artists, the complaint alleges.

According to Songtrust, songwriters are paid mechanical royalties when a song is sold, downloaded, and streamed via “on-demand” streaming services such as Spotify. The term “mechanical” comes from an earlier era when songs were physically replicated on tapes and CDs.

“Spotify has deceived consumers by converting millions of its subscribers without their consent from music-only subscriptions into ‘bundled’ audiobook-and-music subscriptions,” the NMPA wrote in its complaint.

“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, which represents several publishing companies, almost every major recording artist in the United States, and independent recording artists, asks the FTC to “investigate and stop” what it alleges as Spotify’s “unlawful conduct.”

Spotify, which is headquartered in Sweden, didn’t respond by press time to inquiries from The Epoch Times.

Nonprofit Lawsuit

The latest complaint follows a federal lawsuit filed last month against Spotify by the Mechanical Licensing Collective (MLC).

The MLC is a nonprofit organization that describes its role as designated by the U.S. Copyright Office “to ensure that Spotify and other music streaming services accurately and timely pay” royalties owed to songwriters and music publishers.

In its lawsuit, MLC accuses Spotify of copyright infringements and depriving artists of royalties by reducing what is called “service provider revenue” paid to artists by “almost 50 percent.”

Spotify “unilaterally and unlawfully” made the reduction, the MLC complaint alleges, when it added 15 hours of audiobook to its Spotify Premium music subscription and labeled it a bundled subscription.

MLC also alleges that while the cost of the newly bundled premium package to music subscribers remains at $10.99, Spotify offers the same premium package for $9.99 to audiobook subscribers under its “Audiobooks Access Plan,” thus overcharging music customers.

“If unchecked, the impact on Songwriters and Music Publishers of Spotify’s unlawful underreporting could run into the hundreds of millions of dollars, if estimates by industry publications are correct,” the MLC says.

According to the NMPA complaint, the “scheme” already has cost artists more than $150 million in revenues.

In a first-quarter financial report released in April, Spotify said it has 615 million subscribers, a 19 percent increase since last year. Spotify also reported a 20 percent increase in profits, bringing its total revenue to $3.6 billion. It credited $168 million of its growth in profits to its new Audiobook offerings.

The MLC, which filed its complaint against Spotify in the U.S. District Court for the Southern District of New York, seeks compensatory damages for the alleged “underpayment of royalties” by Spotify and a declaratory judgment order that the streaming service correct its bundling practices.

Both lawsuits allege that Spotify began bundling audiobooks into its premium subscription services on March 1.

According to TechReport, the largest group of Spotify users are 18 to 24 years old, and the next largest group is 25- to 34-year-olds.

Alice Giordano is a freelance reporter for The Epoch Times. She is a former news correspondent for The Boston Globe, Associated Press, and the New England bureau of The New York Times.
Related Topics