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Daniel Ek says Spotify is enabling a record industry revival

By | Published on Wednesday 17 February 2016


After Recording Academy President Neil Portnow used his Grammy Awards speech to deliver a little dig at the streaming services this week, Spotify chief Daniel Ek yesterday defended his company against its critics in the music community, insisting that the streaming platforms, and specifically his streaming platform, was behind a revival in the record industry’s fortunes.

“When you stream a song, all the people that created that music collectively get paid a small fraction of a penny”, said Portnow in his speech. “Isn’t a song worth more than a penny?”

When asked about those artists who had criticised his company during a Q&A on the Quora website, Ek responded: “The music economy – like so much of the rest of the economy, from cars to publishing to news – is changing as it moves from an ownership model to an access model. And like any change, it can be complicated and challenging for lots of people. We get that, and we understand that. So it’s our responsibility to make sure that artists – and songwriters and producers and everyone else in music – understands that we are in this together with them, and that we are committed to their success”.

Returning to the familiar line about just how much money Spotify has now pumped into the music industry, he continued: “Look, we pay the great majority of our revenue back to the music industry. And as we grow, that revenue is really making a difference. Many people don’t realise that the music industry was in decline throughout all the download years (with a one year exception in which it was basically flat). Now, finally, after years and years of decline, music is growing again, streaming is behind the growth in music, and Spotify is behind the growth in streaming”.

Following that little brag, he added: “Ultimately, we think the best measure of our contribution to the industry will be results – results that will give thousands and thousands of artists, songwriters, producers and so on the chance to do what they love, and their fans love, while being paid fairly for doing it. We love music, we love all the amazing people who make it, and we want to succeed together”.

It is certainly true that it is now the streaming boom that is keeping the record industry’s revenues more or less flat, and flat is good after the steep decline the recorded music business saw between 2000 and 2010.

Though pessimists might want to note that this means the record industry is ever more dependent on a streaming sector that is almost universally loss-making, with venture capital, tel co cash and now money-lenders propping it all up. Therefore, whatever you think of the Spotify model and the royalties it pays – as well as Ek’s arguments that downloads were never going to fuel a revival and that he has turned file-sharers into customers – there is a strong argument that no one in music can afford for services like Spotify to fail.

Elsewhere in the interview, Ek was predictably bullish about his company’s chances of becoming a profitable business, despite its deep-pocketed rivals like Apple, Google and Amazon. He also insisted that, as a company fully focused on streaming tunes, his business – unlike the tech and web giants – had a common goal with the music community. And for anyone thinking he’s just doing all this in a bid to cash out after the inevitable IPO, well, he obviously insisted that’s simply not the case.

The big question, of course, is just how many paying users Spotify needs in order to become a profitable business month to month. Ek’s interview coincided with a Financial Times report that the service – widely believed to have 28 million premium subscribers as of the end of last year – will top 30 million in the next three months.

Much attention is always given to how that compares to Apple Music, now at eleven million users after just over six months in business, though the industry really needs both services to succeed, bringing us back to that key question, what numbers does a streaming service of the £10 a month kind need to be commercially viable long-term? And how long does it take to get that point, given that many reckon Spotify’s freemium-to-premium upsell model is preventing more mass-market middle-priced services from getting off the ground?

Working all of that out will require some strategic intelligence, that’s for sure. The good news is that Spotify has just hired someone to do just that, in the form of one-time IFPI researcher and digital consultant Keith Jopling who, according to MBW, is now Spotify’s Global Head Of Strategic Intelligence.