Spotify’s Bundling Subscriptions Again Under the Spotlight

Spotify’s March 2024 decision to reclassify its Premium subscription tiers as bundles, offering 15 hours of audiobook access each month, has drawn the ire of Republican Senator Marsha Blackburn and Democrat Senator Ben Ray Luján, who have urged Federal Trade Commission (FTC) Chairman Andrew Ferguson to investigate.

The background:

• As we reported here, the 2022 Phonorecords IV legal settlement set the on-demand streaming mechanical rates in the US between 2023 and 2027.

• It stipulates that mechanical royalties are calculated at a significantly lower rate for bundled subscriptions versus unbundled standalone music subscriptions.

• Digital Music News states over 44 million Spotify subscribers were automatically converted into bundled subscriptions, resulting in a significant decline in royalty payments.

The Senators’ concerns:

• The Senators released a letter on June 20 imploring the FTC to investigate Spotify converting Premium subscriptions into higher-priced bundled subscriptions without consumers’ knowledge or consent.

• The letter states, “These actions harm consumers and could deeply damage the marketplace and the music royalty system,” and urges the FTC to “investigate the impact of Spotify’s recent actions, to take steps to protect Americans from being forced into subscriptions without notice or choice, and to safeguard the music marketplace.”

• It continues: “Spotify’s intent seems clear – to slash the statutory royalties it pays to songwriters and music publishers. Not only has this harmed our creative community, but this action has also harmed consumers.”

The 'Basic Plan':

• The Senators’ letter acknowledges that following the negative fallout to the bundling, Spotify “quietly re-launched a music-only paid service, now called a ‘Basic Plan,’ which is available to existing subscribers only.”

• But, it says, “Spotify has hidden the Basic Plan so that existing subscribers must jump through endless hoops to find the option.”

What they said:

• In a statement to Variety, National Music Publishers’ Association (NMPA) President/CEO David Israelite said: “As we have said since they started their bundling scheme last year – Spotify’s forced conversion of subscribers doesn’t only hurt songwriters – it hurts consumers. We are extremely pleased that United States senators Blackburn and Lujan are also asking the FTC to investigate this as it will have ripple effects across other platforms. These unfair business practices hurt music creators and users and it must stop.”