Point-Counterpoint: Is Spotify Good or Bad for Artists?

It’s Time We Stop Blaming Spotify!

By Patrick Campolo

The outcry from artists over the injustices of streaming music royalties, specifically with Spotify, has been a constant buzz in our ears.  But these complaints are in large part unfounded, and in actuality represent more of a lament about the current and undeniably difficult state of the music industry as a whole.  To take this one step further, it could easily be argued that Spotify is actually good for artists, both established and emerging.  This seems counterintuitive when considering the extremely low rates that artists receive from plays on Spotify as well as the minimum threshold of plays required to realize these meager rewards.  So how is Spotify good?

The answer to this question is simple.  True value in the music industry is no longer synonymous with record sales.  While this is a difficult concept for artists and their labels to reconcile, the reality is that the game has changed and the traditional model based on sales is no longer viable.  Piracy has all but destroyed the model, but the advent of the iTunes model has further altered the landscape, in that consumers can now purchase single select tracks rather than a bundled CD.  People are still willing to pay for music, but the number of people is shrinking as well as the compensation demanded for payment, due to these factors.  So how does Spotify provide value?

In strict terms of dollars and cents, the numbers are not impressive.  Consider, however, the alternative.  Without Spotify, the industry would not be receiving revenue from an important source.  After only three years of operation, Spotify became the second largest generator of revenue for the music industry in Europe.  A failure to utilize this source would be more catastrophic than taking a principled stand against low streaming royalties.  In fact, should Spotify adopt a more generous policy for rewards to artists, the venture would be forced into cost-prohibitive subscription fees, essentially killing the service, and in turn, a source of revenue to the industry.

Digging further down, it is even more clear the benefits of Spotify for artists.  People using iTunes typically consume music at a rate of about 7 artists for month, while Spotify users typically listen to closer to 40 artists.  Combine this with the social listening features that Spotify engages, and this information translates into the manifestation of a wider audience of listeners who are more likely to discover new music, share it with friends, and maybe even realize they wish to support an artist by buying a CD or ticket to a live show.

The reality of the industry is grim.  Yet, blaming streaming services like Spotify is akin to jousting with windmills.  It is an exercise in futility.  Furthermore, Spotify can provide new levels of exposure for emerging artists that can take advantage of social listening trends to reach new listeners.  Spotify is not the enemy for artists and blaming the injustice of the changing music landscape on Spotify is neither just nor warranted.

How Spotify is Revolutionizing the Music Industry, and Bringing Artists Down With It

By Brian Weidy

As has been recently announced, Spotify just crossed the 3 million mark in terms of paid subscribers.  While that number has helped diminish the heavy losses Spotify was incurring over its early stages (as seen here) the musicians still are not seeing any more money from this.  As the band Uniform Motion showed in September when they released the breakdown of where they are actually making money (as seen here), the results are shocking.  After translating the Euros to Dollars, every time the full album is played, the band receives $0.04.  To put that in perspective, if the band sold just one CD that they pressed themselves, it would be equal to 200 full album listens on Spotify to make the same amount of money.

One could argue that effectively giving your music away in order to gain new fans is a strategy that has worked incredibly effectively for bands such as the Grateful Dead and Phish.   Those bands, have allowed the free exchange of live tapes of their shows as a way of gaining new clients.  While the idea may have been as an effort to have those new fans come out to shows and buy merchandise, they also bought the CDs.  Where would the Grateful Dead have been fiscally if In the Dark was streamed two million times instead of purchased?  All of their hard work would have netted the band $80,000.

Even before the proliferation of Spotify to the United States, album sales were slumping significantly.  In 1999, the Backstreet Boys album Millennium sold nearly 10 million copies while in 2008 Lil Wayne’s highest selling album of the year, Tha Carter III, couldn’t break the 3 million mark.  While digitization has not been kind to the music industry, as programs such as Napster and other file sharing websites have cannibalized record sales since the start of the millennium, Spotify is hurting the music industry innumerably.  One could successfully argue that something is better than nothing, but when that something is three one-thousandths of a cent, it begs the question of there must be a better way.

While Garth Brooks is a famous holdout from iTunes, publicly bashing it for its rigid pricing structure and lack of album only downloads, those jumping ship from Spotify are far more frequent.  STHoldings, an electronic music distributor, pulled 234 labels from all streaming services due to an inability to generate revenue.  This is typified by this statistic, “Spotify, Simfy, Rdio and Napster accounted for 82% of all ST tracks “consumed” in Q3 but only 2.6% of that quarters Q3 revenue.” (You can read the rest of the article here).  Spotify may be a great way to get more ears to your album, but the odds of recouping the cost of simply putting your album on Spotify is incredibly low, much less recovering the costs of the album.  While the service claims, “Spotify makes it easier than ever to discover, manage and share music with your friends, while making sure that artists get a fair deal,” artists are actually making less than ever before.

***

Kickshuffle is an online news source dedicated to covering the impact of new media on music and music business. Like us on Facebook and Follow us on Twitter.

 

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3 responses to “Point-Counterpoint: Is Spotify Good or Bad for Artists?

  1. Pingback: A Conversation with Grooveshark Founder and CEO Sam Tarantino | Kickshuffle·

  2. Pingback: Premium Spotify vs. Blockify and Smutefy·

  3. Pingback: Opinion: Spotify vs iTunes vs file-sharing and the ethical battle over music ownership by The Way That He Sings·

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