SONO Music Updates: Spotify’s Bundling Sparks FTC Scrutiny Amid Royalty Concerns

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Spotify’s Bundling Controversy: Senators Call for FTC Investigation

Spotify, a leading force in digital music streaming, finds itself at the center of a heated debate after US Senators Marsha Blackburn and Ben Ray Luján urged the Federal Trade Commission to investigate the company’s controversial “bundling” practices. This call to action follows Spotify’s March 2024 decision to reclassify its Premium tiers as “bundles,” adding audiobook access and leading to allegedly reduced royalty payments to songwriters and publishers. The move taps into a legal settlement from 2022, Phonorecords IV, which allows bundled services to pay lower mechanical royalty rates than standalone music subscriptions.

Last year, Spotify faced a lawsuit from the Mechanical Licensing Collective (MLC) over similar concerns, although the case was dismissed. The decision hasn’t silenced critics, as attention turns to the financial impact on the music industry. According to the National Music Publishers’ Association, Spotify’s bundling has led to a $230 million loss for publishers in its first year, with projections of over $3.1 billion in losses through 2032.

Central to the senators’ argument is the claim that Spotify exploits federal copyright regulations by converting premium subscribers to bundled plans without proper consent, effectively slashing royalties. They assert Spotify’s audiobook service is priced to manipulate regulatory outcomes, setting it at $9.99 monthly, compared to the $10.99 Basic Plan providing extensive music access. Spotify’s response maintains their pricing strategy is standard industry practice, emphasizing consumer value and flexibility.

The contention has reignited questions about Spotify’s adherence to the Music Modernization Act of 2018, with criticisms extending beyond musicians to consumer rights. Despite relaunching a music-only Basic Plan, accessibility remains limited, drawing further ire. This unfolding scenario not only pressures Spotify but signals potential ripple effects across the streaming landscape, underscoring ongoing tensions between innovation, fair compensation, and consumer transparency. As the FTC considers its next steps, the music community watches closely, highlighting a critical dialogue around equity in the digital age.

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