
Is Spotify the music industry’s friend or its foe? - eroo
http://www.newyorker.com/magazine/2014/11/24/revenue-streams
======
batiudrami
I think the issue with Spotify is that artists compare revenue to CD sales,
when they should be comparing it to piracy. I listen to (estimated) one new
album every day, as part of about 5-10 hours of listening to music each day
depending on my work schedule. $10-$20 an album is just not a price I'd be
prepared to pay on a daily basis to listen to new music, and before Spotify I
wasn't spending that money; I was pirating them or streaming them on websites
without a revenue share model for labels.

I still buy just as many CDs as I used to (probably about 10 a year), plus
Spotify gets an additional $120 a year from me (70% of which goes to the music
industry), which is a no brainer for me for the convenience of the service. In
addition to the considerable sum ($2000+) which I spend annually on live
music.

The best solution I feel is a two-week exclusive on all new releases for
physical and digital purchases before they hit subscription services. If you
really want the CD, you can buy it, or you can wait two weeks until it's free
on your $10 a month subscription. Sure, piracy will go up, but it is not the
music industry's business to stamp out piracy, it is their business to
maximise music revenue.

This, along with the increased value-adds of physical purchases - deluxe vinyl
editions, signed editions, additional goodies - the "Kickstarter" pricing
model, if you will - is how the music industry will continue to make money.
That and increased ticket prices for live music, and I anticipate most record
deals includng a cut of live revenues for major labels in the future (if they
aren't already).

For the record, I do not think major labels are inherently bad for music - if
you cannot afford to record and promote your album, a major label can do it
for you, at the cost of a large chunk of your profits if you're a hit, but not
leaving you in the red if you aren't - a major part of record label's
profitable artists must cover all the ones who are not also. If you don't want
to do such a profit split, the option is always there to finance the record
yourself and pay labels up front for distribution and marketing.

~~~
forrestthewoods
My only issue with Spotify is that it tricks listeners into thinking they're
supporting artists when they so totally aren't. I equate Spotify to piracy.
Yeah I give them $10 a month but so little reaches artists I might as well
have stolen the music.

And I'm fine with that. If people want to support an artist then they should
buy their album, go to liveshows, whatever. As long as we don't incorrectly
assume that Spotify is supporting the artists we enjoy then everything is
fine.

~~~
batiudrami
Well they are supporting the artist. $500,000 paid to Taylor Swift is better
than what she would have received if people listend to her albums on
Grooveshark, or torrented the album, or whatever. Sure, half a cent per stream
is not much, but it is something. It's not on the same level as buying a CD,
but it's better than piracy, where revenue for the artist is zero.

The other thing is, it's not like Spotify is making bank off their service
either - last I checked they still haven't posted a profit. They can only
charge so much because people will only pay so much for a monthly music
subscription, and 70% of revenue paid directly to artists/labels doesn't sound
unreasonable to me.

I guess fundamentally the problem is "people don't want to pay much for music"
not "Spotify is allowing people to not pay much for music". Artists seem to be
placing the blame at Spotify's feet, when it is less people being willing to
pay for music any more.

~~~
bananaj
I think the thing people are missing here is that the $500,000 paid to Taylor
Swift doesn't go directly to her, that is the gross royalty which presumably
the publishers and label take the majority of. The artist themselves will
receive a fraction of that. The situation is different for indie artists who
are effectively the publisher and label too, but they have the opposite
problem of lack of scale, and the per-play royalty is far more important for
the long tail than for the hits, so the negative impact is greater. Taylor
Swift could survive on magazine photoshoot revenue alone, an option not open
to The Amazing Snakeheads or whoever.

Spotify may not be "making a profit" as a corporation but they still
presumably have hundreds of salaried staff and their business model is
basically jam tomorrow - their fixed costs are mostly the same whether anyone
has signed up to paid subscriptions or not, so they all definitely get paid
and the artists may or may not, but Spotify will sell their product in the
meantime regardless. That isn't ethical. "Exposure" and "discovery" still work
to the advantage of the large labels - Spotify is a new gatekeeper and being
playlisted on the right Spotify list can make or break careers. There doesn't
seem to be much transparency around how level the playing field is and how
much influence the shareholders have.

For an artist, the contrast with iTunes is stark. Apple didn't turn round and
say "we'll pay you if this is a success" \- they paid the full royalty from
day one. Spotify should have been regulated in the same way that radio is, and
royalties should have been on a par with that, as a minimum, with a premium
for the on-demand aspect.

To be honest, YouTube's history is far more ethically dubious but they don't
seem to get the same heat from artists I guess because they are seen as too
big/powerful to be criticised.

~~~
batiudrami
But like I said - that's the deal with signing to a major label - you agree
that they will take a lot of the profits for your album in return for
shouldering the costs of recording and promoting it. Artists can always remain
independent and just pay a unit cost for distribution, but that means taking
the risk of spending their own money on recording, and doesn't necessesarily
come with the marketing opportunities that come with being signed to a major
label.

I don't see Spotify as ethically dubious at all - they've had agreements with
major labels from day one, and have only ever streamed music which they had a
license for (unlike, say Grooveshark). Spotify only pays you if people lsiten
to your music, in the same way that iTunes only pays you if people buy the
music. It's the same deal, just on a 'per listen' not a 'per purchase' basis.
The only issue with Spotify as I see it is that they don't pay artists (or
their representative labels, which again, the artists signed up for) all that
much, but like I said, they're not actually earning that much money either.

------
001sky
_" AM/FM radio pays the writer of the song on a per-play basis, but gives the
performer and the owner of the recording of the song—generally, the record
label—nothing. On digital streaming services like Spotify, the situation is
nearly reversed: the owners of the recording get most of the performance
royalty money, while the songwriters get only a fraction of it. Songwriters,
who can’t go out on the road, are particularly hard hit by the loss of
publishing royalties. As one music publisher put it, “Basically, the major
music corporations sold out their publishing companies in order to save their
record labels. Universal Music Publishing took a terrible rate from streaming
services like Spotify in order to help Universal Records. Which, in the end,
means that the songwriter gets screwed.”"_

------
facepalm
It seems to me in theory it should be possible to make the economics work. I
suspect few people would buy more than one new CD per month, so if the monthly
fee is roughly equal to the price of a CD, the money flow could remain kind of
the same.

Maybe so far the industry depends on whales (people buying a LOT of music all
the time), on the other hand subscription services might also make money from
people who would otherwise have spent less.

Being free, people might listen to more music on Spotify than they would have
listened to otherwise. But that only means the money could be distributed more
evenly. Maybe I don't listen to Lana Del Rey 150 times, but overall I will
listen to 150 songs, so those 0.99$ will still flow into the system and be
distributed.

~~~
furyg3
I used to buy a CD or two every month. Then I started pirating all of my music
(mostly out of convenience). Then pay-per-download options came along
(iTunes), and I used that a bit, but it was still inferior to pirating. Then
services like Spotify came along and I'm paying for most of my music again.

In total I'm paying less for music than I was paying back when I was buying
CDs. But I'm paying more than I was when I was stealing. And in the process
we've gotten rid of stamping and distributing CDs, running stores, etc. If
record labels can't make money now, their whole business model is screwed.

I suspect that the real problem is competition, though, and not profit-per-
song.

------
SloopJon
I mostly listen to albums start to finish from my own largish collection (~90
GB when encoded as 192 Kbps AAC), so I can't really comment on the consumer
experience. As for the artists, Taylor Swift's stance reminds me of Metallica
and Garth Brooks. It kind of saddens me that they focus on this kind of
nonsense, rather than the myriad ways the industry screws its own artists.

~~~
baddox
I'm the same way. I consider the album to be the fundamental unit of musical
expression (although there are obviously plenty of exceptions). The Spotify
interface on iOS is absolutely unusable for this. There is no way to assemble
a music library and browse it by artist and then album.

~~~
Nullabillity
There has been since the latest UI update. On the desktop, every track or
album has a "save" button that looks like a +, which will add it to your
library, which can be sorted by either album or artist. On Android it's under
the menu button for each track. I can't speak for iOS, though.

~~~
baddox
I tried it on iOS last week, and wasn't able to find any way to do it.

------
bcassedy
I pirated music when I was younger, I used Pandora for a while, for a while I
only listened to podcasts, and I rarely listen to music and yet I'm a happy
Spotify subscriber. They've made the experience so easy that I'd happily pay
double the price for the maybe 4 hours a week I listen.

------
experimental-
The Apple reference sound less like a business plan, and more like typical
hype of Apple exceptionalism. Apple makes the top dollar by selling devices
with a nice profit margin. Would they really want to add several hundred
dollars to their price, thus cannibalizing their sales – just to donate most
of that to record labels? (No!) Yes, they would get their cut, but most of it
would be away from iTunes revenue. (Not all Apple buyers use Spotify or
similar services – and if Apple could raise their retail price without
diminishing their sales, they would.)

And if they made the inclusion (of music) optional, why would record labels
settle for much less than what Spotify pays? For no reason, and they wouldn't.

------
rakel_rakel
I think the title of this article hints of a great misconception of what
Spotify is. They (as well as other digital music providers streaming or not)
are part of the music industry now.

The olgopoly has changed, get over it.

------
danols
They have a superior music listening & discovering functionality to any other
competitor by a mile. Is there really anything else needed? I can't see how
such a superior product can fail. But it just seems there are so many people
in the music industry that are living in the past and are slowing down the
pace instead of everyone going all in on it. If Spotify had 10x their
subscribers no one would question the model. The problem is that it takes too
long time to get to those numbers due to all the friction.

~~~
__david__
> They have a superior music listening & discovering functionality to any
> other competitor by a mile.

How is their discovery any better than anyone else's? And how is the player
better than anyone else's? I like Spotify, but the only perk I see is that I
can play any song without directly paying for it.... What am I missing?

~~~
jug
Yeah, hmm, as for me those advantages are intertwined. To get anywhere close
to great music discovery, I need to be able to easily listen to everything I
can discover in the first place.

------
awjr
I'm really unfamiliar with Spotify's reimbursement model. Is it based on the
flattr model? Your $7 being split between the artists you listen to?

------
jon2512chua
Am I the only one who's wondering why we're reading an article that is
supposed to be published/had been published 7 days from now?

~~~
batiudrami
It's from the physical issue. The publication date on magazines is usually
between one week and one month behind the actual release date. I'm not really
sure why, but most magazines do this.

~~~
pgeorgi
That happened because every publication wanted to have an edge over the
others. So some monthly mags started sending their february issue to the
stores in january 28th, and the others looked "late", being the one "01" issue
in a see of "02"s, scheduling future issues a bit earlier to retaliate. Now
they're all nearly a month early.

Similar for weekly publications.

------
NicoJuicy
I think we haven't seen what Spotify will do. You can't run pirated music in
public.

Integration with Spotify and Uber is super smart, there's no competition for
that (not from pirated music anyway) -> extra revenue, extra attention to the
service

Increase the monthly price to 25$ / month for streaming in public... (eg. a
doctor's waiting office, ...) -> extra revenue.

~~~
Nullabillity
This is already a thing, see Spotify Business.[1]

[1]:
[https://www.soundtrackyourbrand.com/business](https://www.soundtrackyourbrand.com/business)

------
radicalbyte
The closest thing to Spotify is Radio. With that in mind, 500k "listens" is a
drop in the ocean. Radio 1 has shows which attract 5 million listeners a WEEK
[1].

[1] [http://www.bbc.com/news/entertainment-
arts-24650892](http://www.bbc.com/news/entertainment-arts-24650892)

------
waterlesscloud
I wonder how much research Spotify has done with their pricing. I assume they
must have done at least some. But they could double the monthly fee and I
wouldn't blink.

Disclaimer- I am an outlier in terms of music consumption.

~~~
iagooar
Well, I would blink. I use Spotify only for discovering music. Once I like an
album, I get it physically or on iTunes.

I think they could tie it to hours / month. A cheap, limited account for
people like me, and an unlimited one for hardcore consumers.

~~~
waterlesscloud
Sorry you're downvoted. Your response is totally legit.

