Tennessee, New Mexico Senators Demand FTC Probe Into Spotify “Forced” Sub Upgrades
Spotify is facing intense scrutiny from Capitol Hill as two U.S. Senators are demanding a federal investigation into the music streaming giant. Senators Marsha Blackburn (R-Tenn.) and Ben Ray Luján (D-N.M.) have sent a scathing letter to Federal Trade Commission (FTC) Chairman Andrew Ferguson, alleging that Spotify has been covertly converting premium music subscribers into higher-priced, bundled plans without their knowledge or consent.
The bipartisan duo expressed “serious concerns” that Spotify’s actions not only harm consumers but also “could deeply damage the marketplace and the music royalty system.” They are urging the FTC to step in, protect Americans from being forced into unwanted subscriptions, and safeguard the integrity of the music industry.
The Bundle Bait-and-Switch?
At the heart of the senators’ allegations is Spotify’s strategic use of its new audiobook offerings. According to the letter, federal regulations allow digital music providers to pay a lower music royalty rate if their paid music subscription is bundled with other “legitimate product offerings.”
“Seeing an opportunity, Spotify has exploited this regulation by converting all Premium Plan music subscribers into a new, bundled subscription offering without consumers’ consent or any notice,” the Senators wrote. They contend that Spotify’s “intent seems clear—to slash the statutory royalties it pays to songwriters and music publishers.”
Audiobooks: A Loophole for Lower Royalties?
The senators highlight Spotify’s Audiobook Access plan as a key piece of their argument. This plan, offering 15 hours of listening time from a limited catalog of 200,000 audiobooks, is priced at $9.99/month.
Notably, Spotify’s music-only “Basic Plan” – which offers unlimited listening to over 100 million songs – is only $1 more.
The letter suggests this pricing disparity is no accident, arguing that the Audiobook Access plan is “set at an artificially high price for the purpose of gaming federal regulations and deeply cutting music royalty payments.” Essentially, the higher the perceived value of the bundled non-music content, the lower the music royalty Spotify is obligated to pay. The senators also point out that the Audiobook Access plan isn’t even offered outside the U.S., suggesting it’s specifically designed to leverage U.S. royalty regulations.
Consumers Left in the Dark
The Senators claim that in March 2024, Spotify “quietly began offering the same audiobook content provided for free in the Premium Plans as a separate subscription and automatically converting Premium Plan subscribers to a purported new ‘bundle’ containing audiobooks.”
This conversion, they allege, occurred “with no notice and no ability to opt in or to continue the music-only subscription they had originally chosen.”
Despite a reported $230 million increase in Spotify’s revenue due to price hikes on July 1, 2024, the company itself estimates a drop of over $150 million in royalties paid to publishers and songwriters in the first year alone. While Spotify did re-launch a music-only “Basic Plan,” the senators state it’s only available to certain existing subscribers and is reportedly difficult to find, leading to only a “handful” of subscribers switching back.
As the largest music streaming service in the U.S., Spotify’s actions are poised to have “lasting repercussions on the creative community and consumers across the country,” the senators concluded, urging the FTC to conduct a swift investigation.
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