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Business News Digital
Taylor Swift debacle means “we have to do more to convince artists” says Spotify chief
By Andy Malt | Published on Wednesday 17 December 2014
Spotify big cheese boss man Daniel Ek has admitted that the whole Taylor Swift debacle has confirmed that he and his colleagues still need to do more to convince artists of the benefit of the streaming business model, and especially the ‘loss-leading freemium to drive premium subscriber’ approach pursued by his firm.
When Swift pulled her whole catalogue from Spotify last month, the streaming service initially published a pretty flippant statement. But when the move by one of the world’s biggest popstars kickstarted a very vocal debate in the artist and wider music community on how the streaming business was evolving, Ek issued a long statement defending his firm’s approach, and insisting it was good for the whole music business.
Speaking to Billboard about the whole hoo haa, Ek said: “What it has highlighted for us is we need to do a better job explaining to artists how streaming benefits them. The point that’s been lost is that Spotify’s the fastest-growing revenue source the industry has. There are many artists to whom, through the labels, we’re paying out millions a year already. Those cheque sizes will just keep increasing”.
To be fair to Spotify, the company has done more than most of its rivals to reach out to the artist community, though a lot of that activity has been focused on the European rather than American music community. And actually most artists and most labels are pro streaming, and pro Spotify, even if they have concerns about how freemium works, and how the money paid by the streaming sector into the music rights domain is split between different stakeholders (labels generally get way more than artists, songwriters and publishers).
But Ek still insists that he’s not going to change his freemium level – which some argue is too generous – and nor will he allow big name acts to opt out of free and just take part in premium (which is basically what Swift wants to do).
He went on in the Billboard interview: “There’s a lot of other places where you can access that music for free, so our view is the only thing that happens by not being in the free service is that the consumer then has to go to another service to get the song, and they will”. Having that consumer listening to songs on Spotify freemium makes them much more likely to become a premium subscriber, Ek adds. Plus Spotify does actually pay a royalty for free plays, even if it’s significantly less than for premium plays.
For the time being – and as Ek looks to the next round of licensing deal renewals at the major labels – Spotify is more focused on making premium more attractive than limiting the functionality of free. “Just like we’ve had deluxe edition of albums, everyone is thinking about how does that look like in a future world? Lossless music – is that a higher priced tier? Is that something that comes with deluxe editions? How should we package subscriptions to consumers? That’s a very big topic right now on the label side”.
Of course, while Ek does need big name artists in his firm’s catalogue to compete, the bigger problem with things like the Swift spat is that it hinders the PR spin that Spotify is THE future of music, something that the firm needs Wall Street to believe in order to maximise the value of the company when it floats. Though it helps that the majors and Merlin-affiliated indies have a stake in Spotify – and therefore a vested interest in Wall Street buying into that story – so with the exception of loose cannon artists like Swift, there shouldn’t be too many headline-grabbing names out to rock the boat.
Until, that is, after Spotify’s IPO. Once the firm’s founders, early investors and label partners have all cashed in their stock, that’s when things will get really interesting. Artists left out of the equity kickback will be looking for a better deal, and the publishers – currently only seeing about 10% of the money – might start threatening to pull if they don’t get a bigger cut of the loot. Most of that is actually for the music community itself to sort out – while Spotify et al are loss making the percentage split they hand over to the music rights owners ain’t going to go up – but a post-IPO Spotify could be caught up in the crossfire.
So that’s something for everyone to look forward to, isn’t it? Merry Christmas one and all.
