The National Music Publishers Association (NMPA) says Spotify‘s financial gains in the first quarter of 2025 come at the expense of songwriters in the US, due to the streaming service’s decision to reclassify its Premium subscriptions as “bundles”.
On Tuesday (April 29), Spotify reported it had reached 268 million premium subscribers in Q1 2025, adding 5 million net paying users since December and exceeding its own guidance by 3 million subscriptions.
Total quarterly revenue in Q1 rose 15% YoY at constant currency to €4.190 billion ($4.4 billion), while Premium/subscriber revenues grew 16% YoY at constant currency to €3.771 billion ($3.968bn).
The streaming company also posted a record-high quarterly operating profit of €509 million ($535.6m).
“Spotify’s latest global subscriber and revenue growth is being subsidized by US songwriters,” NMPA President and CEO DavidIsraelite said shortly after the quarterly figures were published.
“The reality is their user base is growing internationally but those consumers are paying very little.”
“Spotify’s latest global subscriber and revenue growth is being subsidized by US songwriters.”
DavidIsraelite, NMPA
The statement continued: “Their 15% revenue growth is largely due to their undercutting of songwriters through their domestic bundling scheme.
“This strategy bundles music with audiobooks in order to devalue songs and pay a much lower royalty rate to songwriters.
“Do not be fooled by headlines that suggest the profit growth Spotify is seeing is from anything other than finding a workaround to pay music creators less in the US.”
The dispute between song copyright owners and Spotify came to light when Spotify bundled its audiobooks service with its Premium music streaming service last March.
That’s because, under a 2022 legal settlement called Phonorecords IV, music publishers and music streaming services agreed that ‘bundle’ services in the United States are permitted to pay a lower mechanical royalty rate to publishers and songwriters than standalone music subscription services.
In May last year, the Mechanical Licensing Collective (MLC) sued Spotify over the streaming service’s decision to reclassify its Premium subscriptions as “bundles”.
The lawsuit was dismissed in January, and the MLC asked the court in February to reconsider the dismissal.
In its Q1 financial filing with the SEC on Tuesday, Spotify referenced the legal dispute in a section dedicated to “Contingencies.”
Spotify also noted that, “on April 1, 2025, the MLC filed a request to file an amended complaint alleging that Spotify USA Inc. improperly valued the components of the Premium Service bundle and improperly reported royalties for the Audiobook Access Tier product”.
The update from Spotify added that, “The MLC is entitled to appeal the original decision after the resolution of its new claims”.
Spotify also provided an estimate for the value of additional royalties it would have to pay “if the MLC were to appeal and ultimately be entirely successful in its case”.
According to Spotify’s SEC filing, “the additional royalties that would be due in relation to the period March 1, 2024 to March 31, 2025 would be approximately €205 million, plus potentially penalties and interest,” which the company says it “cannot reasonably estimate”.
The bundling issue isn’t the only complaint the NMPA has against Spotify.
In May 2024, it sent a letter to Spotify declaring that the streaming platform “displays lyrics and reproduces and distributes music videos and podcasts using musical works” without permission or compensation to songwriters and publishers.
“Do not be fooled by headlines that suggest the profit growth Spotify is seeing is from anything other than finding a workaround to pay music creators less in the US.”
DavidIsraelite, NMPA
In February, the NMPA, which represents American music publishers and songwriters, launched what it said was an “extensive” takedown action against Spotify, accusing the platform of ignoring widespread violations of music copyrights on the podcasts it hosts.
“Spotify has thousands of unlicensed songs in its podcasts, which it has done nothing to remedy,” Israelite said at the time.
The NMPA claimed that Spotify has been aware of music copyright violations by podcasters “for years,” but the platform “has taken no meaningful action” to address the issue.
In its Q1 report, Spotify reported that “music and podcast advertising was driven by growth in impressions sold, partially offset by softness in pricing and optimization of our podcasting inventory in our Owned & Licensed portfolio.”
Spotify CEO DanielEk told analysts during an earnings call that the Spotify Partner Program, a new monetization system for video podcasters launched in January, resulted in the company paying out over $100 million to podcast creators in Q1 alone.
“When we added podcast, there was a lot of questions and concerns, I think from everyone, that podcasts would cannibalize music and so on. But actually, what ended up happening is we just saw more hours spent by these consumers, which meant, of course, higher retention, which then of course meant lower churn.”
Ek continued: “As we then added audiobooks, we yet again saw a very similar trend, which is if you’re listening to music, you’re listening to podcasts, and you’re listening to audiobooks, you’re spending more time than ones who are just doing either one of these things or even music and podcasting.”
During the call, Ek hinted that Spotify is continuing to expand “audiobooks in Premium,” rolling it out to more regions and introducing tools that drive higher user and author engagement.
