At the beginning of March, Spotify reclassified its Premium Individual, Duo, and Family subscription streaming plans as bundles because those plans now offer access to audiobooks.
The latter org sued Spotify in the US in May for allegedly underpaying royalties to songwriters and publishers as a result of its Premium ‘bundling’ move.
Today (November 19), we learn that Spotify’s rival, Amazon Music, has become the latest music streaming service to bundle audiobooks with its Premium subscription.
In a challenge to Spotify’s audiobook service, Amazon Music Unlimited subscribers in the US, UK, and Canada can now listen to one audiobook a month from Amazon-owned audiobook service Audible. The retail and tech giant acquired Audible for $300 million in 2008.
The NMPA has already responded to the news, and the contrast between the organization’s reaction to Amazon Music’s move and its response to Spotify’s move earlier this year is striking.
“Amazon has engaged with the music publishing and songwriting industry in a respectful and productive way, unlike Spotify.”
David Israelite, NMPA
Added David Israelite: “Amazon has engaged with the music publishing and songwriting industry in a respectful and productive way, unlike Spotify.
“We expect this new Amazon bundle will not decrease revenue for songwriters. Unlike Spotify, Amazon is looking at music creators as business partners and seeking to have a deal in place before the first round of royalty payments.
“This is in stark contrast to Spotify who is trying to pervert the compulsory license and slash what they pay songwriters.”
Spotify announced this past spring that it now considers all of its Premium plans to be ‘bundles‘ because, in October, it started offering 15 hours worth of audiobooks with its Premium plans for free.
The move resulted in the company paying a lower mechanical royalty rate to US publishers and songwriters because, under a 2022 legal settlement called Phonorecords IV, music publishers and music streaming services agreed that ‘bundle’ services in the US are permitted to pay a lower mechanical royalty rate to publishers and songwriters than standalone music subscription services.
In April, the NMPA accused Spotify of “attacking songwriters” after the streaming service changed how it pays out mechanical royalties in the US.
Spotify’s move also triggered a lawsuit by The MLC, the non-profit organization designated by the US Copyright Office to administer a blanket compulsory license and to ensure that music streaming services like Spotify pay the mechanical royalties they owe to songwriters and music publishers.
The MLC argued that Spotify “unilaterally and unlawfully decided to reduce the service provider revenue reported to the MLC for Premium by almost 50%, by improperly characterizing the service as a different type of subscription offering and underpaying royalties.”
Starting today, Amazon Music Unlimited individual plan subscribers and primary account holders of the family plan can listen to one audiobook at a time, of any length, per month with their subscription.
Subscribers can continue listening to their monthly title after the next billing cycle begins, or select a new one. Amazon Music Unlimited is priced at $9.99/month for a monthly subscription or $99/year for an annual subscription for Prime members. Non-Prime customers pay $10.99/month.
Audible’s library includes a US catalog of more than 1 million audiobooks.
Spotify’s Premium Individual tier, which includes 15 hours of audiobooks, is priced at $11.99 per month. In June, Spotify announced a $10.99/month Basic plan for the US that does not include the monthly audiobook listening time.
“The combination of Amazon Music and Audible, two pioneers in audio streaming, brings an unmatched selection of audio entertainment to customers.”
Steve Boom, Twitch / Amazon
“The combination of Amazon Music and Audible, two pioneers in audio streaming, brings an unmatched selection of audio entertainment to customers,” said Steve Boom, VP of Audio, Twitch and Games for Amazon.
“Amazon Music redefined audio streaming through the magic of Alexa, and with the introduction of high-definition and spatial music.
“Today, Amazon Music introduces the audiobook category to a brand-new audience by making Audible’s industry-leading catalog of audiobooks available to Amazon Music Unlimited subscribers.”
In August, Spotify asked the court to dismiss the MLC’s lawsuit, but The MLC filed a formal response to Spotify’s motion in September, urging the court to deny “Spotify’s motion to dismiss in its entirety and with prejudice”.
In its response to Spotify’s motion to dismiss, the MLC argued that “the financial implications [of the bundling move] are enormous for the creators of the music Spotify has relied on to build its business — with the estimated impact to be about $150 million, just in the next year.”
Spotify estimated in July that it would have to pay out $50 million if the MLC wins its bundling lawsuit.
In a regulatory filing with the US Securities and Exchange Commission tha month, under the ‘Contingencies’ section, Spotify noted that “various legal actions, proceedings, and claims are pending or may be instituted or asserted” against the company.
One such claim was, of course, filed by the MLC against Spotify in May. According to Spotify’s July filing: “If the MLC were entirely successful in this case, the additional royalties that would be due in relation to the period March 1, 2024 to June 30, 2024 would be approximately €46 million, of which approximately €35 million relates to the three months ended June 30, 2024, plus potentially penalties and interest, which we cannot reasonably estimate.”
That EUR €46 million figure cited by Spotify converts to USD$49.52 million at the average quarterly exchange rate published by the European Central Bank.
The €35 million [in royalties alone] for the three months ended June 30, 2024 (i.e the second quarter of 2024) converts to $37.68 million.
If Spotify were to pay around $37.68 million (€35m) less in mechanical royalties per quarter following its bundle change in March, SPOT’s mechanical royalty payments would be cut by approximately $150 million over the course of a year, which correlates with the $150 million estimate cited by the MLC in its filing.
Most recently, in an SEC filing published after it reported its Q3 financial results last week, Spotify provided an update to the figure (as of Q3) it estimates it would have to pay out if the MLC wins its bundling lawsuit.
According to Spotify: “If the MLC were entirely successful in this case, the additional royalties that would be due in relation to the period March 1, 2024 to September 30, 2024 would be approximately €94 million, plus potentially penalties and interest, which we cannot reasonably estimate”. Spotify added in the filing: “We intend to vigorously defend this lawsuit”.
At the average quarterly exchange rate published by the European Central Bank, that €94 million figure cited by Spotify last week converts to $103.24 million it estimates it would have to pay to the MLC, if the MLC wins its bundling lawsuit.
Amazon Music now claims to offer “the largest selection of audiobooks across genres” as well as Audible’s slate of original and exclusive productions including Project Hail Mary from author Andy Weir, classic 1984 starring Andrew Garfield, Cynthia Erivo, and Andrew Scott, and “evergreen bestseller” Can’t Hurt Me by David Goggins.
Audible is also home to the complete library of Harry Potter audiobooks and related stories. It also recently announced a new co-production of the original Harry Potter stories.
Scheduled for late 2025, these full-cast audio productions will offer immersive audio entertainment through high quality sound design in Dolby Atmos.
“The opportunity to extend Audible to Amazon Music subscribers enables us to captivate the next generation of listeners with a treasure trove of storytelling.”
Bob Carrigan, Audible
“Audible has revolutionized the way people worldwide consume books, and as our category continues to evolve and scale, we’ve seen an ever-growing appetite for audiobooks,” said Bob Carrigan, Audible CEO.
“The opportunity to extend Audible to Amazon Music subscribers enables us to captivate the next generation of listeners with a treasure trove of storytelling, while Audible’s standalone service will continue to provide its exceptional library and customer experience in a suite of plan options for audiobook lovers who can’t get enough.”
