Spotify Under Fire Again: Accused of Misleading Consumers and Underpaying Royalties

Consumer Deception Allegations

The NMPA claims that Spotify misled subscribers by converting their music-only subscriptions into bundled audiobook-and-music subscriptions without their explicit consent. This change, combined with Spotify’s recent price hikes, means subscribers may unknowingly be paying for services they didn’t intend to purchase.

Also read: Spotify to Launch Premium High-Fidelity Audio Tier for Dedicated Users

Mechanical Royalties Dispute

The dispute over mechanical royalties, a longstanding issue between music rights holders and Spotify, has intensified this year. Spotify’s reclassification of its Premium tier as a bundle allows it to pay lower royalty rates, potentially costing songwriters and publishers an estimated $150 million over the next year alone.

The Mechanical Licensing Collective (MLC), responsible for distributing royalties, has also sued Spotify for underreporting revenue since the reclassification. This has serious financial consequences for music creators, as Spotify’s payments are based on the Copyright Royalty Board’s rates, which are lower for bundled subscriptions.

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Next Steps and Industry Impact

The NMPA is calling for the FTC to investigate Spotify’s practices and has also reached out to several state attorneys general and consumer advocacy groups. The NMPA has also advocated for changes to the Copyright Act to address the issue of bundled subscriptions and royalties.

This latest clash between the music industry and Spotify highlights the ongoing tensions over fair compensation for creators in the streaming era. While Spotify argues that its bundled offerings provide value to consumers, the NMPA and MLC maintain that the company’s actions are harming music creators and misleading subscribers.

Also read: Spotify Co-Founder Daniel Ek: ‘I’m Not Going to Sell’

The outcome of this legal battle could have far-reaching implications for the music industry and the broader landscape of streaming services. As consumers increasingly rely on bundled subscriptions, ensuring transparency and fair compensation for creators will remain critical issues.