In case anyone has missed the news this week, some indie labels and distributors have decided to pull their songs from Spotify and all streaming music services because they think that the revenue earned from Spotify etc. is too low and cannibalises sales of their music from places like iTunes. One of the most vocal voices speaking out against Spotify was Blu Mar Ten, a UK production trio. They posted a link to fuckspotify.com on their Facebook page which contains the following message:
Just a quick note to thank you ever so much for offering artists, musicians and songwriters everywhere the chance to preserve our credibility by offering us (spelled: dictating to us) royalty rates that even a crack-head would turn down. We really don't like getting paid for our music, and thanks to you and other apps like you, we won't have to be bothered by it.
Love & Kisses,
Every musician and songwriter in the world.
It later turned out that one of the Blu Mar Ten trio, Leo Wyndham was or still is a director of iTunes Europe. Yeah right, let's not give them too much credibility then. You can read more about the whole Blu Mar Ten debacle here in much more detail.
Then there was independent artist Jon Hopkins who tweeted this yesterday:
Apples and Oranges
Jon seems aggrieved that he received £8 for 90,000 Spotify plays. However his mistake is to compare a Spotify play against a Radio 1 play. Radio 1 has approx 11,000,000 listeners so if you do the maths that's 0.0000045p per listener. Spotify pays 0.000088p per stream (listener) according to Jon's own figures above. So by Jon's own maths, Spotify pays more.
Another factor at play here is the deal that the artist has in place with the publishers and record labels. Not all are equal so it's impossible to calculate what an average pay per stream/radio play per artist will be.
As well as the issue of the royalties the other issue seems to be that some artists and labels worry that by having their music on Spotify means they will lose out on legal downloads and physical sales. Coldplay decided not to offer their latest album Mylo Xlyoto on any streaming services. On release it broke the record for first week digital album sales, with more than 80,000 downloads, although it's worth noting that Amazon discounted the download of the album to just £3.99 during the week of release. Despite that, surely with sales figures like that it shows justification for not releasing it on streaming services then? Well no because the week after the Coldplay album release, Florence + The Machine released their new album, Ceremonials on all streaming services and it sold 94,000 copies in it's first week, knocking Coldplay off the number 1 spot. So did having the album available on Spotify actually help with sales? Hard to tell but that's certainly a theory.
The way the Spotify model works is that they pay artists and labels a percentage of advertising revenue as well as monies made from their paying subscribers. The beauty of this is that as Spotify scale and their user base grows, so does their revenue and so will their payments to artists, labels etc. So to pull your music from Spotify now is in my opinion really short sighted. If we look to Sweden for example almost 9 out of 10 of 16 to 25 year olds (85%) are on Spotify and half (55%) listen daily. Sure the Swedes have a better broadband infastructure than us and there is a lot of pride for Spotify as they are a Swedish company but nonethless that is one hell of an impressive figure. 2 years ago the labels in Sweden were making more money from Spotify than iTunes. Yes, 2 years ago.
What are labels doing right?
Although the press lately has been about labels that are moving away from Spotify I thought I'd highlight what some of the labels are doing well and how they're embracing Spotify and the playlist culture.
The indpendant licensing, distribution, sales and marketing group have, it's fair to say bought into Spotify and playlists. They have this page on SMP where we showcase all of their playlists in one location. They have even promoted it via an advertising campaign on Spotify itself.
PIAS Digital GM Will Cooper also had this to say about Spotify:
"PIAS have supported Spotify since their launch, and we are genuinely excited to see their expansion into new territories. We continue to closely monitor the revenues generated and their impact, both positive and negative, on other revenue streams for our artists and labels. Spotify’s success in helping drive overall music revenues in Sweden suggests that streaming services should be given time to prove themselves."
Now That's What I Call Music
Now Music is the most successful compilation album brand in Europe. They called us in for a meeting last year and explained that although they know who their traditional audience is, they realise that consumption of music is changing and wanted to do something about it. As a result they've produced playlists of all 79 Now albums to date and published them on SMP. They even have their own UK Top 20 playlist that they update weekly to keep things fresh inbetween Now releases.
Universal Music have also launched Digster, their repository of high quality curated Spotify playlists. And of course Warner Music has Rhinofy. The message is clear, the major labels know that Spotify is here to stay and is going to play a big part in how we listen to music in the future so they're investing in it.
Just this week Spotify launched in Austria, Belgium and Switzerland. It's no secret that it's looking to expand into Australia and New Zealand and beyond too. Since they integrated into Facebook it's been reported that they've added 4 million users. Spotify haven't release any new user figures officially for a long time but my conservative estimate is that they'll be above the 20 million mark by now.
With those figures it's not unfeasible that before long they'll reach 100 million users and beyond. Especially if they carry on with their plans to bundle the service with telecoms and cable tv companies etc.
I recently asked a senior record label exec in Norway why they place so much importance to Spotify playlists. His reply was "We have to….people are consuming music via playlists here in the Nordics." His response adds weight to the argument that a la carte downloads ane even albums to some extent are on their way out and users are moving to playlists as their primary way to consume music. Just look at this playlist from Sony Sweden, it has 95,000 subscribers and every week they update it to include their latest releases. That's how they're now promoting new releases and getting music to the masses.
One of the reasons why I love Spotify and use it as my only way to listen to music is because of it's pure simplicity and ease of use. I know I'm not alone in this too. So what effect will it have on the labels and artists in the future if they don't have their music on Spotify? Simple, it won't get discovered or played. I don't use iTunes or any other mp3 download services so if it isn't on Spotify then it doesn't exist for me. So surely some royalties from streaming are better than none?
UPDATE: I've just seen this brilliant article from Kudos Records, another independent distributor. It's well worth a read, but here's some highlights:
Spotify is their number two digital account in most of the territories where it exists in terms of actual turnover. In Scandinavian countries it is their number one source of income (physical or digital). Spotify has not cannibalised their traditional sales
Artist compensation: Kudos have discovered that the artists who have been complaining about revenue from Spotify seem to be on a points deal with their record labels, in which they earn less than 10% of digital income. This is a record label issue, not a Spotify issue.