Music Publishers Urge States to Investigate Spotify

A trade group representing songwriters and music publishers filed a complaint against Spotify with the Federal Trade Commission last week, alleging the music streaming platform’s decision to bundle subscriptions is deceiving consumers.

Ajc.com reports Georgia is one of 10 states to which the National Music Publishers Association sent its complaint, encouraging attorneys general to investigate the matter on behalf of the Spotify customers in their states. The selected states, which also include Tennessee and North Carolina, have a strong interest in protecting songwriters and robust consumer protection laws, said David Israelite, the NMPA president and CEO, during the organization’s annual meeting this week.

The NMPA alleges Spotify deceived users by changing their music-only subscriptions to bundled audiobook-and-music subscriptions without their consent. As a result, subscribers are paying for products and services they did not intend to purchase, according to the complaint. This month, Spotify announced it would increase the costs of its Premium plan — its second price hike this year. For an individual tier, the subscription will increase from $10.99 to $11.99, and the duo plan will increase from $14.99 to $16.99.

In an emailed statement The Atlanta Constitution-Journal, a Spotify spokesperson said the company rejects the NMPA’s “baseless accusations and will continue to provide consumers incredible value and a best-in-class experience.”

The complaint is another step forward in the ongoing battle between music publishers, songwriters and Spotify over mechanical royalties, a storied history that dates back to the streamer’s inception in 2006.

Spotify has a blanket licensing agreement that allows it to offer tens of millions of musical works from songwriters and music publishers. These licenses require Spotify to pay mechanical royalties.

The issue of mechanical royalties is one of the most confusing and opaque topics in all of music, said Matthew Wilson, a partner with Arnall Golden Gregory and co-chair of its entertainment and sports industry team.

The battle escalated this year when Spotify reclassified its flagship ‘Premium’ subscription tier as a bundle, which allows the streamer to pay lower royalty rates for streams.

During the annual meeting, Israelite estimated the change will cost songwriters and publishers an estimated $150 million over the next year, and even more in the future.

Here’s why: Spotify makes its monthly royalty payments to the Mechanical Licensing Collective (MLC), a nonprofit under the U.S. Copyright Office. The amount Spotify pays is determined by an entity called the Copyright Royalty Board. The MLC then distributes those royalties to songwriters and publishers.

Under the copyright board’s most recent document setting rates and terms for interactive streaming and digital downloads, streaming services providing bundles can pay a lower rate than standalone music subscriptions.