Spotify: money back for "Car Things", but higher subscription prices
Spotify raises subscription prices in the USA for the 2nd time in a year. That could save money. The Car Thing is switched off, money back after protests.
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The music streamer Spotify is raising its subscription prices in the USA for the second time in a year. The rates are rising by one to three US dollars per month. One reason for the price increase could be a lawsuit filed by a collecting society. There is good news for US customers who have fallen for the retrofit infotainment system for cars called "Car Thing". Price increases for Spotify subscribers in other countries are likely to follow.
Spotify sold the gadget called Car Thing to paying US subscribers in 2022 at a unit price of 90 US dollars. It was designed to be installed in the car, where it functions as a kind of retrofit infotainment system that can play songs and podcasts via Spotify. It will have played, it must be said, because Spotify will withdraw support for its Car Thing at the beginning of December 2024. The device becomes electronic waste.
Initially, there was no money back. But then a class action lawsuit followed, and now Spotify is offering customers who feel they have been ripped off the opportunity to contact customer service to "discuss their options". Some have already reported receiving refunds.
Spotify is looking for its future
At the same time, Spotify continues to search for a viable business model. With one exception, the company has posted an operating loss in every financial year. This is hardly surprising: the majority of revenue, whether from advertising, subscriptions or other sources, goes to the rights holders. A leaked contract between Spotify and Sony Music in 2015 showed that Spotify must either pay at least 60 percent of gross revenue or minimum fees, which is more expensive. In addition, there were free advertising spaces, advance payments, plus top-up fees if at least one in ten listeners was not a paying subscriber.
In the search for a sustainable future, the company has already made significant staff cuts. Spotify is also looking to increase advertising revenue - including from paying subscribers. They may not be forced to watch traditional commercials, but paying artists will be imposed on them. However, higher revenue from advertising and subscription fees is only likely to help to a modest extent, precisely because the majority goes to the rights holders. At the same time, operations are not getting any cheaper and the amount of hosted music is increasing by the second.
Audiobooks should reduce royalties
However, the US licensing agreement with librettists, composers and music publishers from 2022 contains an interesting clause: Spotify must pay lower royalties for revenue from bundled services than for pure music subscriptions - provided the additional service does not merely have "token value". In November, Spotify added 15 hours of audiobook usage to every paid subscription and then activated the clause in March.
The collecting society Mechanical Licensing Collective (MLC) claims that this caused royalties from Spotify paid subscriptions to drop by almost half. The music publisher Sony Music Publishing claims that Spotify royalties (including the ad-financed part) have fallen by around 20 percent. Spotify believes that the bundle with audiobooks will bring in additional subscribers, which means that royalties will actually be higher in the long term (albeit at a lower percentage).
Licensors run to court
The music publishers are upset. Sony and the National Music Publishers' Association are still in talks, but the MLC has already sued Spotify. It alleges that the bundle is not a genuine bundle offer because the audiobooks are of little value. It claims that Spotify added the audiobooks without being asked and without raising the price.
Spotify is now countering this accusation by increasing the price. From July, a single subscription will cost twelve US dollars net per month (+$1), a double subscription 17 dollars (+$2) and a family subscription 20 dollars (+$3). Only the student rate will remain at six dollars per month. For new customers, these rates apply immediately, for existing customers from July.
Incidentally, Spotify also offers its own audiobook tariff in the USA. This also includes 15 hours per month, as well as ad-financed music streaming, and costs ten US dollars per month. Additional audiobook hours cost extra - you only find out how much extra after signing the contract. The offer is obviously not close to the company's heart. The audiobook subscription cannot be found on the US website - you have to use a search engine.
The court case is called Mechanical Licensing Collective v Spotify and is pending in the US Federal District Court for the Southern District of New York under case number 1:24-cv-03809.
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