Spotify’s Bundling Controversy: Senators Call for FTC Investigation
Two U.S. senators have urged the Federal Trade Commission (FTC) to investigate Spotify’s recent bundling approach, alleging it harms consumers and threatens the music marketplace. This comes after Spotify reclassified its Premium tiers in March 2024 to include 15 hours of audiobook access per month, a move that has raised significant controversy in the industry. Under the 2022 Phonorecords IV settlement, bundled services pay lower mechanical royalty rates than standalone music services, allowing Spotify to reduce payments to songwriters and publishers. The Mechanical Licensing Collective (MLC) previously sued Spotify for underpaying royalties following this reclassification, though the lawsuit was dismissed in January, prompting the MLC to seek reconsideration in February.
On June 20, Senators Marsha Blackburn and Ben Ray Luján sent a letter to FTC Chairman Andrew Ferguson, emphasizing that Spotify’s automatic conversion of Premium subscribers into more expensive bundled plans occurred without adequate consent, potentially undermining both consumer choice and the royalty system. Highlighting a $230 million loss for publishers reported by the National Music Publishers’ Association (NMPA) during the bundling’s first year, the senators argued that Spotify’s set pricing for audiobooks sought to exploit regulatory structures and diminish royalty payments. They further claim that Spotify’s audiobook service pricing is artificially high to reduce music royalty obligations. Despite the company’s counterarguments about standard industry practice and consumer value, these developments have sparked bipartisan action questioning Spotify’s adherence to the 2018 Music Modernization Act’s spirit.
In response, a Spotify representative defended the company’s strategy, citing transparency with users and the variety of options offered. Nonetheless, the senators criticized the reintroduction of a music-only Basic Plan as insufficiently accessible and obscured by complex access requirements. The NMPA, expressing concern over continuing losses projected to exceed $3.1 billion by 2032, supports the senators’ call for an FTC inquiry, warning of broader implications for the music industry. This unfolding situation underscores pressing challenges within the digital marketplace and the critical balance of innovation, fair compensation, and consumer rights.
