Spotify (NYSE:SPOT) shares dropped more than 3% Thursday after reports stated the National Music Publishers' Association filed a complaint with the US Federal Trade Commission about the company's decision to provide audiobooks to subscribers, which resulted in reduced royalty payments to songwriters.
The National Music Publishers' Association is a trade group that represents music publishers and songwriters.
The addition of audiobooks allowed Spotify to reclassify its premium subscription offering as a "bundle." Under the system set by the US Copyright Royalty Board, this qualifies the streaming giant to pay songwriters a discounted rate since it's now paying for the licensing of books and music under the same subscription price.
The National Music Publishers' Association claims in its complaint that the bundle is unlawful. They argue that subscribers were automatically rolled in and not given the option to remain on a music-only tier, which doesn't yet exist in the US.
The Association believes payments to songwriters could decline by about $150 million over the next year as a result.