There was considerable coverage of the content of the ‘What an artist makes’ article I did last week, with Digital Music News kicking it off, and Gizmodo and others getting in on the same action.
The focus of the article was to show just how much the band would make from their album based on a variety of listening choices, from streaming through buying vinyl. The obvious fact is that the greater the cost and lower the overhead … the more the band made.
One message that some have been spreading for a few years is that an outcome of the success of streaming media is made at the cost of artists getting paid. As we found in the recent ownership survey, ownership isn’t going anywhere.
In my article I focused on how the multiple business models of streaming, subscriptions, download, and physical media required an artist to be more knowledgeable and nimble in how they handle their affairs. But in the original artist post and some of the other articles there was a focus on how Spotify in specific dealt with artists compared to the record labels.
Here is the statement from Spotify:
Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.
Spotify is generating serious revenues for rights holders, labels, publishers and the artists that they represent. We have paid over $100m to rights holders since our launch, and the overwhelming majority of our label partners are thrilled with the revenues we’re returning to them. Spotify is now the second single largest source of digital music revenue for labels in Europe, according to IFPI.
It is also important to note that Spotify was created as a better, more convenient alternative to piracy. Estimates suggest that around 95% of all music downloads are illegal. Spotify is now monetising an audience the large majority of whom were downloading illegally (and therefore not making a penny for the industry) before Spotify was available.
I think that the analogy of commercial radio works well – with subscription being more like Sirius, but with you in charge of the channels. In other words, Spotify isn’t meant to supplant ownership, but rather to supplement it with music you want to hear but don’t necessarily want to purchase. Before Spotify and other subscriptions services, there was a word for how people had that listening experience: piracy.
Spotify came out of Sweden, and in spite of appearing at the top of many ‘standard of living’ and ‘health care standard’ and other lists … it also used to be at the top of the ‘music piracy’ list. But with the advent of Spotify and the initial generous Free mode, piracy rates in Sweden plummeted as they discovered that Spotify was ‘better than piracy’. I have a number of friends from Sweden on RPG forums who have used that exact phrase – many used to be ‘casual pirates’ who would buy some, download some … and immediately switched to buy some, Spotify some.
That is the important distinction – for many folks, piracy is just something they do. They hear a song and hit a download site to get it. With affordable services like Spotify, MOG, Slacker Premium and Rdio, they can now simply listen to that song. My wife had an old Cher song in her head, and was able to find the exact ‘Greatest Hits’ album she has on vinyl on the subscription service and listen up in our room while doing other things. Then she added it to a playlist, and moved on to the next thing.
So rather than looking at subscription services as ‘revenue destroyers’ for artists, we need to realize that the music business is changing for everyone involved, and that for artists and everyone else – having legitimately streamed music is MUCH better than piracy, even if there isn’t a massive revenue stream involved. Because at the end of the day, one is supporting the artist and the business, the other is not.