What happened to Spotify?

Spotify is going through something right now. On Monday morning, the industry-defining audio streaming service announced that it would increase its Premium subscription prices for users in the United States, starting next month. The individual plan increases by $1, the Duo plan by $2 and the family subscription by $3.

The changes come nearly a year after Spotify first raised subscription prices in the United States. Never, increasing the individual plan to $10.99 per month to match competitors’ price points. This increase was intended to appease music industry executives (who demanded better royalty payments) and investors (who demanded that Spotify make consistent profits). However, the new costs make the paid Spotify experience slightly more expensive than Apple Music or YouTube Music. As a consolation prize, the service offers paying listeners another special perk: If you’re only on the free tier, there will be a limit on the number of song lyrics that can be played in the app while you listen. (Just in case you’re not sure how to take the extra seconds to use a resource like AZLyrics or Genius.)

As in 2023, the updated cost levels were imposed in response to lingering concerns over profitability, driven more urgently by the costs of Spotify’s aggressive push into audiobooks, a business that has been more cumbersome than the company probably expected. Back in March, Spotify reclassified all of those aforementioned plans as bundled subscription deals so that already-paying customers would automatically have access to those audiobooks, alongside their favorite songs, lyrics, videos, and podcasts. In response, the Mechanical Licensing Collective — a government-created nonprofit that helps coordinate streamers’ royalty controls — filed a federal lawsuit against Spotify last month, accusing it of diminishing its responsibilities by reducing artist payments from Premium fees while expanding the products available to subscribers on Spotify. little to no additional cost.

This is added to other litigation and threats to this effect. The National Music Publishers’ Association, a powerful trade group for major songwriter publishing houses, also opposed Spotify’s new “bundles” and called on the company to cease and desist regarding its alleged unlicensed lyrics, music videos and podcasts platform. The CEO of Sony Music Publishing, one of the companies backed by the NMPA, sent a letter to the songwriters under his wing explaining that he was working with the trade group to explore “all options to enforce the enhanced rates.” . Spotify was entitled to pay them. pre-bundle.* (Translation: Other combinations could be on the table.)

Meanwhile, Spotify is also facing a class-action lawsuit from aggrieved subscribers who purchased its beloved “Car Thing” audio gadget, all existing models of which will be bricked by the end of the year. Although it did not initially commit to offering refunds, the company is now offering compensation to customers who purchased a $90 Car Thing directly from Spotify itself, and not on a resale marketplace, through the through small digital checks of up to $12.

There’s an easy joke to make about how the $12 refund payments exceed the newest compensation Spotify offers to most artists. (Think about those whose songs never exceed the monetization threshold of 1,000 plays.) But over the past few weeks, Spotify has already done a pretty good job of directing public contempt.

Controversies over the bundling have drawn condemnation outside the legal realm, with Spotify’s former global head of music publishing writing an op-ed in Billboard denouncing the new arrangements as “blatantly dishonest.” More naysayers were heard over the weekend, when CEO Daniel Ek posted an ill-advised tweet stating, “Today, with the cost of creating content near zero, people can share an incredible amount of content. » After many artists expressed understandable fury at having their painstaking, expensive, and labor-intensive creative work dismissed as low-effort “content,” Ek clarified that his “original goal was not to devalue the time, effort or resources involved in creating meaningful content.” works” and that he had thought about “the significant drop in the cost of creation tools (microphones, laptops, cameras)”.

However, I’m not sure Ek really understands the value of any kind of work and human input outside of the C-suite. During Spotify’s latest quarterly earnings conference call, he seemed flabbergasted that following the company’s largest wave of layoffs ever (17 percent of the workforce, or about 1 500 employees, laid off in December), there has been an impact on core operations and even user growth.

“This has disrupted our daily operations more than expected,” Ek told investors in April. “It took us a while to find our feet. »

These reductions were driven by falling stock prices and considerable spending. But even though Spotify didn’t make up the profit difference, shareholders were happy enough with the job cuts that Spotify shares rebounded once again. As it turns out, Ek and his fellow executives took the opportunity to sell large amounts of their stock, Bloomberg reported, with the CEO redirecting the proceeds toward “investments focused on artificial intelligence, life sciences and climate », notably “a Swiss company”. startup that works to slow down the aging process. (Seriously, what is up with these guys and anti-aging technology?)

So while a subscription price hike may simply make business sense for Ek and Spotify’s C-suite, it’s also an obvious way to get more out of a business that has long strayed from its original purpose: the music streaming. (The company’s latest deals to expand its video podcast library and run an extension with Google’s Gemini chatbot only underscore the point.) The company could do very well: Bloomberg’s Lucas Shaw notes that Spotify maintains its first-mover advantage in audio. -streaming market among subscribers, who find it difficult to stop if they were early adopters. Spotify was basically to music what Netflix was to video, and it still is.

Ek probably isn’t too bothered by the lawsuits, nor the burden of running a much leaner operation, nor the outrage among listeners and musicians over a more expensive plan to “justify adding stuff (that they) don’t want” which continues to harm. the artists whose work makes Spotify what it is. At least the stock prices rebound.

Update, June 5, 2024, at 1:20 p.m.: After publication, the Coalition of concerned creators, a group of “writers, musicians, literary agents, and other creators demanding transparency from Spotify,” sent this statement to Slate: “All musicians, creator advocacy groups, unions and organizations, and other creator stakeholders, including authors and podcasters, must stand firm against Spotify’s recent policy change. It is essential to advocate for fair compensation for music creators, who play a vital role in the sustainability of the industry. Additionally, this is a clear pattern of behavior and we remain concerned about Spotify’s transition to new audio formats, like audiobooks, and how this pattern of behavior will affect other creators as well, like the authors.