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As Spotify debate goes atomic: where are we at?

By | Published on Monday 15 July 2013


Of course Godrich and Yorke aren’t the first artists to criticise Spotify, though the streaming service has recently talked round some of the early holdouts, and critics have been less vocal of late. So this new intervention by artists as high profile as Godrich and Yorke will be a set back for Spotify in PR terms, even if the loss of content being announced yesterday was negligible.

While labels and publishers have joined in with the Pandora bashing of late, it is mainly artists (and very small labels) who have been Spotify critics. That’s because Pandora is (with some recent exceptions) licensed via the collective licensing system, which the US music industry increasingly reckons Pandora is trying to exploit to drive down its royalty payments. Spotify, though, has direct relationships with the labels, the bigger of which also have equity in the digital firm. Said labels, therefore, are allies.

This has been a help and a hindrance to Spotify. On the one hand, it means they have lots of high profile supporters in the record industry. On the other hand, it makes it harder for the digital firm to point out that when some artists have complained about the tiny royalties they are receiving from Spotify, they are probably talking about the money they receive after the label has taken its cut, which is likely the vast majority of the money – ie it could well be the label rather than the streaming service that is screwing over the talent.

Though Atoms For Peace released their album on Beggars label XL Recordings, which is known for splitting streaming revenue 50/50 with its artists, and has a reputation of being more transparent than the majors, which removes the “oh, it’s the label to blame” excuse. (And, of course, some of the artists who have criticised Spotify royalties in the past self-release, so there is no label taking the lion’s share of the money there either).

One big challenge for Spotify et al in countering critics in the artist community is actually the notion that streaming services are a panacea to the music industry’s woes, “Spotify is here to rescue the music business” etc.

Partly put out by the streaming sector’s own PR machine, and partly the result of lazy journalism, the royalties streaming services pay out ARE worryingly low if you buy the idea that Spotify and its direct rivals are the sole replacement for the CD business of old, rather than one cell in the matrix that is the new music business.

And all the more worrying when you realise that: Spotify’s profit margins are tiny; the £5 basic/£10 premium price point has become very much the expected norm, making big increases tricky; and the saving grace that more mainstream users will listen to less music (making the per-play income higher) is based on the assumption mainstream users will ever sign up for all-you-can-eat music services, which is far from assured.

The solution is undoubtedly the expansion of sell-through services by all the streaming platforms, so that Spotify etc drive extra revenue for artists in other ways (beyond ad and subscription monies), helping unlock the other cells of that new business model matrix.

It’s something most streaming services have mentioned at one time or another, and an area where YouTube has led to date, though behind the scenes the Beats in-development streaming service, code named Daisy, is also reportedly making significant moves in this direction, capitalising on boss man Ian Roger’s Topsin-based direct to fan knowledge and contacts.

Sell-through from streaming music platforms is so obvious it’s surprising ticket, t-shirt and premium content buttons haven’t been standard for a while, though the number of stakeholders involved in any one artist’s worldwide affairs makes the whole thing less simple that it should be.

Of course none of that helps songwriters and producers without tickets or t-shirts to sell. Though it might just be that featured artists of the future need to share a bigger cut of the loot with their collaborators if copyright revenue is going to account for a smaller slice of the pie.

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