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A lawsuit from users alleges that the streaming giant falsely represents that playlists and recommendations are tailored to listeners when they’re actually subject to influence from major labels.
On Spotify, indie music fan Genevieve Capolongo combed the platform for lesser-known musicians outside the mainstream, like Próxima Parada, Julia Cooper, and Brusco. But despite her listening preferences, all that was recommended to her was major-label tracks from Drake, Zach Bryan and Justin Bieber.
How those songs landed on her playlists points to what’s becoming an increasingly contentious issue for the streaming giant: an alleged pay-to-play regime that favors some producers and labels to the detriment of users who believe they’re being recommended tracks personalized to their listening history. And now, a class action has been filed against Spotify for allegedly bamboozling consumers.
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The lawsuit, filed in New York federal court on Tuesday, brings claims for deceptive practices and false advertising, among others. It seeks unspecified damages and a court order blocking Spotify from dealing in paid arrangements to dictate playlist and recommendations placement and requiring it to disclose when songs are influenced by promotions.
Spotify has emerged as one of the primary channels through which listeners discover new music. It offers two types of playlists: editorial, which are hand-curated by tastemakers at the company, and algorithmic, generated through the company’s recommendation engine. Both wield immense influence. Inclusion on a flagship list, like Rap Caviar, instantly exposes an artist to millions of potential listeners actively looking for new music. It’s a lucrative opportunity. Placement on Today’s Top Hits has been estimated to boost streams by nearly 20 million, generating up to $163,000 in royalties.
Placement of a song can cost between $2,000 for playlists with modest followings and up to $10,000 for the largest, claims the lawsuit, pointing to media reports. Other payments are disguised as “consultancy fees” of $100 to ensure editors hear a track. Under this regime, independent artists without major-label backing are at a disadvantage, according to the complaint.
Major label tracks appear on Spotify’s most popular playlists at a disproportionately higher rate because they’re amplified by recommendation engines, per a study on how labels impact music recommendations. Their dominance stems from labels controlling vast music catalogues that streaming platforms need to survive, the lawsuit says. Through these licensing deals, labels can extract concessions, like preferential algorithmic placement.
The pay-for-play regime was further cemented in 2020 when Spotify introduced its Discovery Mode, which allows artists to boost the visibility of certain tracks on algorithmic playlists in exchange for reduced royalty rates, the lawsuit claims. Under this system, participants pay with lower-per-stream payouts instead of cash up front. It’s long-been one of the company’s most controversial features among industry insiders, with critics likening the feature to the radio payola scandals that marred the music industry before the streaming era, where record labels would pay radio stations for spins without the stations disclosing payment.
Drake appeared to reference Discovery Mode in his defamation lawsuit against UMG over the distribution of “Not Like Us,” criticizing his label for taking fewer royalties in exchange for increased plays. Back in 2021, the House Judiciary Committee had requested information on the program, pointing to concerns that the feature may “set in motion a ‘race to the bottom’ in which artists and labels feel compelled to accept lower royalties as a necessary way to break through an extremely crowded and competitive music environment.”
Important to note: listeners aren’t told when a track has been promoted through this program. The lawsuits alleges that this creates the “false impression of neutral, personalized recommendations when financial incentives are quietly driving the algorithm.”
In a statement, Spotify called the allegations “nonsense.” It added, “Discovery Mode is a feature artists can use to flag priority tracks for algorithmic consideration in limited contexts: Radio, Autoplay, and certain Mixes. It doesn’t buy plays, it doesn’t affect editorial playlists, and it’s clearly disclosed in the app and on our website.”
The company stressed that the lawsuit gets “basic facts” incorrect, stating that it incorrectly suggests Discovery Mode is used in all algorithmic playlists. Spotify also refuted that the program only helps major label artists, contending that the feature is popular among both major and independent acts.
Notably, the suit doesn’t come from an artist questioning the model, but rather a consumer who alleges Discovery Mode reneges on representations from Spotify that her recommendations will be based around her individualized tastes. At issue in the lawsuit is the way in which Spotify markets its playlists as specifically personalized to users. On its website, it claims the platform is the “place to discover the perfect song for the moment” and that they’re “made for you, with you.” It says its Discovery Weekly playlists updates “with new music based on your personal listening habits” to help users “find new artists, tracks, and hits to fall in love with.”
In a page about the impact of promotion on its recommendations, it cautions that the company offers services that enable artists and record labels to highlight priority songs, increasing the likelihood of them being displayed to users in certain algorithmic playlists. The lawsuit challenges Spotify burying the disclosure.
“Even setting the deception aside, Spotify’s business model has made true personalization impossible,” writes Innessa Huot, a lawyer for users, in the complaint. “The platform’s systematic preference for major-label artists creates a feedback loop that amplifies their visibility and entrenches their dominance.”
Consider Today’s Top Hits, a playlist that major labels dominate because they can buy visibility by leveraging their relationship with Spotify, the lawsuit alleges. Once featured, their tracks generate millions of streams, justifying renewed placement and further cementing their songs’ popularity.
The filing comes days after Spotify was accused in another class action lawsuit of permitting massive amounts of streaming fraud on its platform, which siphons royalties from artists whose numbers aren’t artificially inflated.
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