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Wreath Lectures

Wreath Lectures 2013: Why You Shouldn't Feel Guilty for Using Spotify
Charles Ubaghs , December 30th, 2013 07:08

In our latest Wreath Lecture, Charles Ubaghs uses actual facts and figures to offer you absolution for your streams, as he explains why Thom Yorke, David Byrne and their glum pals are wrong about Spotify

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Moby called Thom Yorke an old man yelling at trains the other week. Upon hearing the news, Yorke - the man who at the dawn of the 21st century loudly tossed away his guitar and embraced electronics - yanked his indie senior citizen bus pass out on twitter and proudly declared himself "A 45-year-old luddite and proud of it." No one should expect a Biggie & Tupac turf war to erupt off the back of this mild exchange, but if you're looking for a 140 character or less summary of the year's biggest debate in music and tech, then these two middle-aged musicians nailed it.

The debate, of course, is Spotify (now the de facto figurehead for all streaming platforms) versus musicians who've accused it of doing everything from not paying new artists to destroying creativity full stop. No other story has so perfectly dominated the axis between the music, technology and general press in 2013. At the centre of the ruckus lies a handful of music types, a bunch of bloggers and Spotify. The mud slinging has been fierce, and with it came a deluge of stories, erroneous statistics and opinions masquerading as hard truths. Now that we're all essentially the media thanks to technology and social media, it's become almost impossible for listeners to understand what impact their digital consumption actually has on the music they love. I've seen people on my own Facebook feed worryingly ask if they should stop streaming music, while others have turned into rabid streaming naysayers armed with bogus figures skimmed from the web during their lunch break.

The reality is simpler and also far more complicated than most of the pundits let on. For the sake of music fans, who've been forced to quietly sit through this like children trapped in the middle of a ferocious custody battle, here are some essential things you need to know about the great streaming battle of 2013.

Meet the Nays

Thom Yorke is the name most associated with pushing the Spotify debate into the mainstream spotlight last July, but it's Nigel Godrich, long time Radiohead producer and member of Atoms For Peace, who was the most vocal driver of the criticisms against Spotify. His core argument is simply that the current Spotify payment structure is slanted heavily in favour of the major labels; labels who get a much larger share of the streaming rates, thanks in part to "secret deals for favourable royalty rates" and catalogues that include hugely popular artists like Katy Perry, Beyoncé and Led Zeppelin. Small labels and newer artists, he argues, have the odds stacked against them, in part because they'll inherently have a much lower volume of streams and they've been given a far smaller share of the royalty pie thanks to those "secret deals". For Godrich, the main point here is that the system simply doesn't work for catalogue AND new artists. They can't be lumped together.

Godrich and Yorke, who also count Beck and most recently Johnny Marr among their number, are two of the most high profile critics of the streaming model. The debate really started in 2012 when Damon Krukowski of Galaxie 500 and Damon & Namoi penned this piece for Pitchfork. In it, he breaks down what Galaxie 500 earned from Pandora and Spotify plays in the first quarter of 2012. The results can't even be described as meagre. Krukowski finishes the piece by announcing that all of Galaxie 500's records are now available to stream freely (or buy) on the band's Bandcamp, a platform that offers no payment for streaming.

Though Krukowski's piece has been one of the mostly widely circulated - including by Godrich - it's Cracker and Camper Van Beethoven frontman David Lowery who's been the most active campaigner for artists' digital rights. Over the past year he's done everything from release a study of the most undesirable lyric sites - which led to the National Music Publishers Association filing take down notices with 50 sites - to arguing that Google supports piracy through Google Ads that appear on pirate sites. You could write an entire Wreath Lecture on Lowery alone, but in the streaming music debate it's this post, where he shares his songwriter royalty statements from US streaming radio platform Pandora, that's become another signpost for many in the anti-streaming camp.

And even with that many critics shouting from the castle walls, it was a piece published by David Byrne in The Guardian in October that blew up the streaming debate even more and brought it to the attention of people who think Yorke and Godrich are just types of ice cream. Titled The Internet Will Suck Creative Content Out of the World, Byrne's article echoes Godrich's claims that the streaming system is stacked against newer artists. As part of his argument, Byrne rolls out stats claiming even Daft Punk are set to only make $13,000 each from 'Get Lucky''s 104,760,000 streams, a figure that by the time of its publication in The Guardian had already been disproven by the commenters in a post on Death & Taxes Mag. Their post initially attempted to make the same 'Get Lucky' claim as Byrne, before the writer realised his mistake. For the record, if you're using the per stream royalty numbers shared in the Death & Taxes piece, Daft Punk will have made $966,947.68 for 100 million streams of 'Get Lucky'.

Meet the Eks

Daniel Ek is the 30-year-old Swedish founder of Spotify. Even though YouTube, Pandora, Soundcloud, Rdio and Deezer, among others, are all digital streaming platforms, it's his company that has become the lightning rod in the streaming debate. There's been a lot of assumptions made about Spotify, but here are the basic facts you need to understand about how it operates as a business.

Spotify is a music on demand service, unlike Pandora, which is a personalised online radio service, or iTunes, which is a digital version of a bricks and mortar record store where you pay a one-time fee to own the music. A music on demand service does what it says on the tin. You want to hear a piece of music? Do a quick search for it. If Spotify has it, you can listen to it. Spotify makes its money in two ways. It offers a free version of the platform that includes ads you have to sit through. Or, you can subscribe for £10 a month to access an ad-free version that also gives you the ability to save playlists (which for many users simply means albums) on your mobile for offline listening - essentially the same thing as loading up your iPod or iPhone with music.

That's how you or I understand and experience a streaming service like Spotify. Things begin to get complicated when you start poking around how the money Spotify pulls in gets paid back to the artist. Most people assume that when they hit play, the artist gets paid. That's not the full story.

Spotify currently pays nearly 70% of their total earnings to rights holders and keeps the remaining 30%. It's a pretty standard royalty breakdown in the digital space today. If you build and sell an iPhone app, for example, Apple takes 30% from every sale. The same applies to Amazon if you sell an eBook in their Kindle store.

The key word to remember in the above paragraph is rights holder. A rights holder does not automatically equal the artist. A rights holder is usually a record label or music publisher. To release their music, an artist will generally sign the recording and publishing rights over and agree to some kind of sharing of the royalties earned. The label holds the recording rights and is normally responsible for doing everything from funding and manufacturing a record, to marketing, PR and getting the music on the radio. The label will also typically work with a distributor, whose job is to get the record into stores and then takes a cut from the sales for their efforts. The music publisher holds the publishing rights, and they do things like collect royalty payments from radio.

Even after getting paid, the artist will also have costs they need to pay out from what royalties they finally receive. This normally means giving managers a cut, for example. There's also a huge number of variables, including what can often look like an enormous amount of deductions for things like recouping recording costs and accounting for potential breakages during shipping, that affect how much money ends up in the artist's hands. The contract terms an artist strikes with the rights holders will have a massive impact on their earnings. And while it might be easy to raise your fists in the air and shout "damn you labels-distribution-music publishers for screwing over artists", for every story you hear of a bad record company, there are many examples of good companies and people who provide a genuine service to the artist and work hard to ensure they get a fair deal.

Like a Facebook relationship status of yore, it's complicated, and things have only become more complicated in the digital era. After all, who collects royalties from a streaming service like Spotify? Is it the distributor, who would normally have been collecting the money from album sales, or is it the publisher, who would have collected money from radio plays? And does a stream count as a sale, which normally means an artist gets a smaller cut as the label has to recoup for things like the physical manufacturing of the record? Or is it a radio-like play, where the publisher and artist normally split royalties 50/50? Beggars Group, home of Adele, Vampire Weekend and Atoms for Peace, give their artists a 50/50 split of streaming revenue because they can't justify labelling a Spotify stream a sale. The fact that Atoms for Peace's label gives them a generous split compared to the 10 to 15% you hear for other artists does raise some eyebrows, but more on that in a second.

In Spotify's defence, they've been doing the right thing by paying out 70% of their total revenue to rights holders. Spotify's challenge here is simply that they've entered an industry that's historically operated through complicated relationships and a very, very tangled web when it comes to the money.

Some answers for the Nays

In order to get to where they are today, Spotify made various deals with labels, including of course the big labels with major catalogue artists. Though Godrich, in his attack on Spotify, labelled them "secret deals", the reality is that it's been an open fact since at least 2009 that the big labels were all givensizeable shares in Spotify early on. They have a tangible interest in the company, and with Spotify now valued at $4 billion as of November 2013, it's clear the labels could be set for a very big pay day if a tech giant like Google bought them out. Just so you understand how much of a drop in the bucket $4 billion is to big tech companies, Samsung spent £14 billion on marketing alone last year. The estimated total global revenue for the music industry in 2013 is £17 billion. Some argue that Spotify are simply taking the music industry for a ride in the hopes of cashing out in the near future, but there's been no sign of this from the Spotify camp. Their focus, like Netflix, appears to be centred on becoming a media-tech giant in their own right.

Having been fairly subdued in their response to critics, Spotify finally offered up a dose of real transparency a few weeks ago with the launch of Spotify Artists. The website is designed to explain to artists how Spotify works and how its earnings are divided up among rights holders. Having looked at their revenue sharing model, the truth is that when it comes to the sharing of earnings, Godrich is right. The total amount of money generated each month by Spotify is paid out to rights holders based on how many streams they contribute to the monthly pot of streams. Which means Spotify doesn't really pay out on a per stream basis, they divide up the pie on a monthly total. So, if you're a label with a huge catalogue of classic artists and current superstars, you're far more likely to get a bigger piece of the pie than the small indie label with a new underground artist, simply because your catalogue is contributing to more streams. Other factors also have an impact, including what territory the music is streamed in (artists will often have different royalty rates for different territories), and whether the listener is a free or paying user - Spotify pays rights holders a higher royalty rate for subscriber streams.  

The fact is that big labels make more money because they have more popular artists. The smaller artists make less money because they're simply not as popular. Reduced like that, it's hard not to see something that looks an awful lot like the pre-digital status quo. Where things become harder for the indie artist as it currently stands is that, in a streaming environment like Spotify, there is no room for a DIY music economy to flourish outside of the mainstream. To participate, you have to enter into the same ring with the heavyweights.

You can light your torches and start burning your iPhones now if you like, but there's one key point the anti-streaming brigade continually ignore when discussing the streaming music issue…

...the ring they refuse to step into is tiny.

Even with a valuation of £4 billion, Spotify is not a globally mainstream platform. The last time Spotify officially released user numbers in April 2013, it announced 24 million global users, with six million of them paying subscribers. To put that into context, 47.7 million Brits (90% of the population) listened to radio in the third quarter of 2013. Appleannounced in June that it now has 575 million active iTunes users. YouTube currently lists its monthly user numbers at one billion, with over six billion hours of video watched each month - that 2013 viewing figure is up 50% from 2012 - and it is officially the largest streaming music site in the world.

Spotify is small. But even at its current size, Spotify has paid out $1 billion to rights holders over its short lifetime, with $500 million of that in 2013 alone. What a lot of the critics complaining about streaming services keep missing is simple:

The first thing is scale. The more a platform like Spotify scales - meaning the larger it gets - the more it can pay out to rights holders. If Spotify has paid out $500 million in 2013 off the back of 24 million users with only six million of them paying subscribers (remember that Spotify pays out a higher royalty share for subscriber streams), imagine what it could pay be paying with 40, 60 or even a 100 million users. The monthly royalty pot available to all musicians becomes much, much larger.

This chart from Spotify highlights how much they paid with six million subscribers to five different types of albums in July of this year, and what they could pay out for those same albums with 40 million Spotify subscribers.      

When it comes to the numbers, a lot of of what's been recently slung around as sacrosanct data in the debate is old. The royalty numbers from Krukowski's piece, for example, were taken from the first quarter of 2012. In that same quarter, Spotify's official user numbers were still 10 million with three million paying subscribers. There's a reason why long time streaming holdouts like Metallica, Pink Floyd and Led Zeppelin are finally appearing on Spotify - the 2013 numbers point to them making a lot of money as legal streaming grows. The once anti-streaming Dave Stewart of the Eurthymics told The Guardian last September that if Spotify had 100 million subscribers, the Eurthymics would be making as much money as they did in their 80s prime.

But even away from how much money a handful of music dinosaurs could make off streaming, the key second issue rarely discussed is repeatability. Historically, money on music sales was made by a one time transaction. You paid for the record in a store and that was it. The only money made was at one single point. A streaming model offers something different. Every time you play your favourite artist, they get paid. Which means that even a niche artist with loyal fans could potentially be making money through streaming for years instead of just at the single point of sale. While the exact value of a lifetime of streaming versus a single purchase is still being established (if it's of interest, I'd recommend economist David Touve's look at the issue), at this exact moment in time this does mean that a 'new' band like Atoms for Peace will potentially make far less money upfront than they would on the old model of single transaction sales. If you're on tiny label and need a lump of cash to help fuel your new album, touring etc, then it's going to be a challenge if you're counting on just streaming royalties. But the point still stands that this is likely to change sooner rather than later. Spotify and its direct competitors are volume businesses and the larger they grow, the more smaller, newer artists will get upfront and potentially over time.

Bit of the hard stuff

As much as I'll raise my pom-poms in support of streaming platforms, as the numbers currently stand, we are still straddling an abyss (even if it's an increasingly narrow one). But pulling music from streaming platforms isn't a solution to the problem. Former Gang Of Four bassist Dave Allen has been very vocal in his rebuttals of Byrne, Godrich and Lowery, and rightfully points out that all three are failing to accept we're in the middle of a transitional state where new markets are being formed and evolving. And like any new market, you can't wilfully ignore what users are telling you they want in the hopes they'll somehow revert to an outdated system that was more lucrative for you. No other industry would tell you that ignoring what your customers want is a good idea. The bottom line, and what's been most lost in the debate this year, is that for most listeners it's not a choice between streaming or buying music.

It's a choice of streaming or stealing.

For many music lovers I know, their first experience with Spotify was a revelation, like suddenly being given access to the great cosmic jukebox they previously could only dream of. My 62-year-old father understood this when I showed him Spotify a few years ago. Outside of radio, it's now his sole means of listening to music, and he's a paying subscriber. This from a man who regularly asked me to grab albums off Napster for him at the start of the century.

And that's where the real power of platforms like Spotify, Deezer and Rdio lies. The true appeal of Napster when it first launched wasn't simply that it was free music, it was the fact that you suddenly had access to huge libraries of music almost on demand. Spotify and co. have beaten the Napsters by removing the 'almost' and provide music literally on demand. And it's done through services that only allow you to listen to official releases and every play equals money earned - something that isn't always a guarantee on streaming video platforms.

As a defence, some of Spotify's supporters have attempted to argue it exposes listeners to music they might eventually buy. Byrne, in his widely shared piece, couldn't fathom why the average listener would buy if they already have it in front of them on demand, especially if they're able to save that music to their phones for offline listening (which, again, you can do on streaming subscriptions). On that, I agree with him, as does Dave Allen. And with new streaming services set to launch in 2014, most notably the Dr Dre backed Beats and a streaming subscription service from YouTube, all of it points to a likely future where streaming digital music, not buying, is the norm.

Billy Bragg recently said "Artists railing against Spotify is about as helpful to their cause as campaigning against the Sony Walkman would have been in the early 80s". He's right, and the reality is that in the short term, smaller, newer acts will simply have to keep struggling along to find a way to survive, something that isn't exactly a new experience for independent musicians. What is likely to emerge in 2014 is a larger debate between artists and labels over royalty rates from contracts written in the analogue era. It's already started in Sweden. A group of musicians in Spotify's homeland are filing a lawsuit against various labels over their split of Spotify royalties.

The debate will continue in 2014. As it should. Progress is something that should always be met with a close look at how it impacts all of us. But for those feeling guilty for their use of Spotify or Rdio or Deezer - don't. Napster was a disruptive force, but we're now faced with a model that may well be a solution to the problems it caused, or at least the start of one. Don't forget, radio executives once dismissed TV as little more than a passing fad, and in the early 80s it was claimed cassette tapes would destroy the music industry. Things evolve and we adapt. Ever the story goes.

Jon
Dec 19, 2013 1:01pm

I actually am one of those who uses Spotify to determine if I would buy. I don't subscribe and have no intention to so I wouldn't use it on my phone. Otherwise, I don't want to be captive to my laptop - I'd rather use actual physical media. Funny that there is a group of people who decry this notion, but they are the same set who seem to exclusively push things like vinyl and audiophilia, which are directly contrary to exclusively streaming music. I'd rather be able to listen to full songs and jump around easier in Spotify to test an artist out than have to listen to 1 min clips on Amazon or iTunes.

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Herr Hugel
Dec 19, 2013 1:53pm

I don't.I use Spotify with Sonos and I like it. So there.I buy vinyl from Norman Record and I like it. So there.

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Leo
Dec 19, 2013 1:55pm

Great article! These are different times... The most important is to make people have access to music, no matter the format. Moreover, streaming services are so "new", there's still a lot to happen, they shouldn't be ignored or villainized like that. As the author said "it's a choice between streaming or stealing". Buying CDs or records is not a major concern for the average listener anymore...

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Post-Punk Monk
Dec 19, 2013 2:47pm

I dislike the streaming model, personally, but I appreciate the well-argued positions that this story advocates. Job well done, Mr. Ubaghs. I have no interest in Spotify My wife bought me a subscription to Pandora in 2006, and I discovered some great new music, but it was a burden to me because it tied my listening to a computer and that caused me stress. I have no music on my portable, non-cell-phone devices. Managing intangible musical files is also a burden to me. At best, my year of Pandora was a way to find new artists to buy on CD [which is how I roll]. But I prefer to discover new music by reading about it.

http://postpunkmonk.wordpress.com
For further rumination on the Fresh New Sound of Yesterday®

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amanda raymond
Dec 19, 2013 3:06pm

I'm a napster subscriber (yes napster still exists, now legal and owned by rhapsody), I listed to an album recently by a singer I wasn't aware of but hard a feeling I would like her, I was right, I told other's about her, made friends with her on twitter and bought someone her album for Christmas.

I'm sure others have had similar experiences.

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Alex
Dec 19, 2013 3:13pm

Great analysis, but there is one issue you have ignored. Say that Spotify grows and coverts the majority of music consumers (those who buy digital/CD/vinyl) to its paid subscription service. Many of these users who have traditionally contributed far more than £9.99 per month to the recorded music industry are now contributing far less. Is £9.99 per month really enough to restore royalties to an acceptable level? At the other end of the spectrum, listeners who traditionally buy a few singles per month are unlikely to be swayed to pay £9.99 pm indefinitely when they can own what they want for less. And if they did, would it be fair that users who contribute a limited number of plays to a limited number of artists effectively subsidise the listening habits of those who contribute a greater number of plays to a greater number of artists, yet put the same amount of cash into the pot?

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Kevin
Dec 19, 2013 4:31pm

I know that I've bought more records in the past year than I have in previous years as a result of my Spotify subscription. All from new bands on smaller labels.

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Scott
Dec 19, 2013 5:20pm

"Hey guys, I've grown a crop of carrots, give me 1p a month and you can gorge yourself silly on them, and hey! maybe if you like some you can buy some in a bag for a quid"

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aaron.
Dec 19, 2013 5:36pm

Really fantastically written article... informed me a lot in certain places. For myself, I dislike streaming simply because I like to own, finally, the things I like and listen to-- a bit of a hoarder. Whether that be anally-arranged external hard-drives of MP3/AAC/FLAC files, or the old-fashioned IKEA Expedit. I don't like the idea of the cultural products I love residing on some cloud somewhere.

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Dec 19, 2013 5:43pm

"The bottom line, and what's been most lost in the debate this year, is that for most listeners it's not a choice between streaming or buying music.
It's a choice of streaming or stealing."

Meaning what? That the listener's desire to download at least 10 new albums per week is more important than the creators' desire to be reimbursed for the creation of those albums? It's disingenuous (or simply plain incorrect) to describe that as a "choice". Please explain how it is a choice between streaming or stealing, and why it is not a choice between streaming, stealing or, y'know, paying something? Nobody is forcing people to not pay for albums! We have iTunes, Amazon, Bandcamp or eMusic now, so the "I don't buy CDs, I only want downloads" argument doesn't wash anymore.

"The true appeal of Napster when it first launched wasn't simply that it was free music, it was the fact that you suddenly had access to huge libraries of music almost on demand."

No, it was because it was all free. You couldn't HAVE "access to huge libraries of music almost on demand" if you had to pay for all of it! Are you seriously trying to tell me that everyone would have been using Napster like that, accessing all these huge libraries of music if they'd had to pay for the privilege?

All these arguments about the rights and wrongs of streaming/downloading music are pointless. They always boil down to one, utterly incontrovertible truth: if you want something enough to look for it, download it and then listen to it, then it has value for you; if something has value to you, it is exploitative for its maker not to be reimbursed for it.

I like Spotify; I use Spotify, but I'm under no illusions that it's providing musicians with any kind of recompense for their time, money, effort and craft expended. They'd earn more money busking on the high street for an hour.All bands should get on Bandcamp; when I buy things via Bandcamp I tend to pay more than is asked; cos it's the morally correct thing to do. I'm a fucking saint, me.

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Spacious
Dec 19, 2013 6:09pm

My personal favorite way of consuming recorded music is the most destructive of all. I like to go to a "CD Shop" and purchase the disks sold at a discount because they're "used." I may have a close-to-audiophile set up at home, but I still can't hear the difference between the new CD sold for $16 US and the used one sold for $8 US.

I am informed that the artists in question make absolutely nothing from this transaction. There ought to be a law.

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RJC
Dec 19, 2013 6:32pm

"It's a choice of streaming or stealing."

This is the part of the pro-Spotify argument that always does my nut in. I hate to be that guy who draws some tedious analogy between digital music and the 'real' world but its the old "Hey Mr Newsagent, I'm going to give you 5p for this Mars bar. Be grateful for this 5p because otherwise I'm just going to steal it. Those Mars bigwigs in Slough can suck my balls!"

Can 'Streaming - its better then theft!' really be considered a good argument? Most things are better than theft to be honest, so I never find myself entirely convinced by this line of reasoning.

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Taun Aengus
Dec 19, 2013 7:34pm

In reply to :

Thanks for the thought provoking article. I'm gonna have to side with Byrne and Yorke on this one. The little-known artists and musicians are going to continue to struggle no matter what, but I constantly ask myself--Is what I hear on the internet worth what the artist gets paid? The answer for me is generally NO.
There are too many people out in the world that want something for nothing.

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Dec 20, 2013 5:53am

So Daft Punk will have made less than one penny per stream?

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Anon
Dec 20, 2013 9:17am

The problem I have with spotify is that the amount of income it generates is insignificant. Artists might as well put their independently released music on bandcamp, with the buy option, than get a few cents for 1000 streams. It's just a promotional tool like any other, except people pay for it and the industry gets money, not the artist.

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matt milton
Dec 20, 2013 4:40pm

I hadn't really looked at that Spotify-derived chart and appreciated how it fitted into the article until now.

Essentially this feature's conclusions are a regurgitation of a Spotify press release centred upon a very ambiguous numbers chart, in which the actual amounts paid out are deliberately made much, much smaller than the amounts they "expect" to be paying if they get more subscribers in. That's pretty sneaky. And pretty ridiculous, when you think about it.

If a record company ever said, in defending how little it paid its acts, published a chart shouting "But THIS is how much money we could pay if only 40 million people bought our product!" they would quite rightly be laughed out of town. It's not our fault for paying such a pittance, it's your fault for not all subscribing to our wonderful service!

Furthermore, correct me if I'm wrong, but it doesn't say how many plays it took to reach those royalties. How many plays of a "Niche Indie Album" does it take to earn $3300 of royalties in one month? That's the important question. Without knowing that, those figures are no use to anyone.
(Incidentally, is the "Niche Indie Album" etc one specific album, or an average based on a representative cross-section?

PR bullshit from Spotify's marketing department. "imagine what it could pay be paying with 40, 60 or even a 100 million users!" enthuses our conscientious scribe Charles Ubaghs. Nice bit of press-release regurgitation there.

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ed
Dec 20, 2013 5:13pm

@Alex - as an indie musician I've long been resigned to the fact that the triumph of streaming feels pretty inevitable.

But actually if you do some sums, even in the 90's the total music industry revenue (in the UK) worked out at something to the effect of a few quid per person per month.

So if spotify (or an equivalent) could get subscription rates up to a significant level, then in theory there's no reason why artists couldn't be equitably recompensed...

...in the meantime i look at my PRS statements (the latest of which doesn't mention spotify at all, though on the other hand I got 3p from Xbox) and have to just shrug

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n
Dec 20, 2013 6:43pm

In reply to matt milton:

"If a record company ever said, in defending how little it paid its acts, published a chart shouting "But THIS is how much money we could pay if only 40 million people bought our product!" they would quite rightly be laughed out of town. It's not our fault for paying such a pittance, it's your fault for not all subscribing to our wonderful service!"

Exactly.This article and those numbers are misleading. It doesnt matter if spotify is a new technology,it only benefits the "music industry", the people who are only in it for the money, instead of the artists. The people who actually made the art you are enjoying so much have to conform with the loose change, as always.

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Robert Saunders
Dec 21, 2013 10:48am

I've been a Premium subscriber since earlier this year, which I need in order to be able to play via my Squeezebox setup. On top of my monthly subscription, it's also more than doubled the number of albums I buy, mostly as flac downloads (I don't intend to subscribe to Spotify long term, so no way is this a replacement for my music collection). Most of these purchases are on small independent labels and of artists on the obscurer end of the spectrum. Occasional hard copy purchases via Norman Records in Leeds, who are terrifically efficient.

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Video Buddha
Dec 21, 2013 11:34am

How quickly times change. There is something pretty objectionable about this article, but not to do with its defence of streaming, but right here in this line:

"Spotify currently pays nearly 70% of their total earnings to rights holders and keeps the remaining 30%. It's a pretty standard royalty breakdown in the digital space today. If you build and sell an iPhone app, for example, Apple takes 30% from every sale. The same applies to Amazon if you sell an eBook in their Kindle store."

I want to focus on the line "It's a pretty standard royalty breakdown in the digital space today." How quickly things change. I used to work for a publisher during the emergence of Amazon, 15 years ago and Amazon had no business model that worked, and seemingly still doesn't today other than - get investors to throw money at it, price everyone else out of business, make no profit, get investors to throw even more money at it, and gloss over that with super fine publicity and because you're too big to fail. While I was at the publisher, Amazon were the one who relentlessly negotiated margins down to almost cost price - ie we make a book that costs x.00 dollars to produce, Amazon offer you x.01 dollars for it. The publisher went bust, as did loads, because you couldn't not go with Amazon because you would lose a third of your sales (even 15 years ago - presumably way more now), and you couldn't go with Amazon because it made no business sense. So fast forward to 2013, and everybody gets to keep huge percentages of the product - 30%, woah where did that come from it used to be 15%ish.

It's a strange anomaly that the distributor should get to keep so much, because with digital products you don't have the hard copy to worry about, but look at the prices between cds and mp versions.... Hardly any difference, in fact for older well established artists, the cd is often cheaper. Ditto for books. You also don't have bricks and mortar overheads to worry about, and stores cost a lot of money to maintain, from physical buildings down to workforce. But no - more money was still needed, so gradually, aggressively, Amazon - and it was them at the forefront, introduced a new model whereby the distributor hoovered up a far larger portion than before. And while some would have it down to greed, I think that's a simplistic and ill-informed response, I'd have it down to a multitude of things, one - desire to own the market by offering the lowest prices, but two, most importantly - desire to survive. Their numbers don't add up. Never have done. And here's where I think we are with Spotify and several others, they ask for a disproportionate amount of each sale, 1) because they can but 2) because they have to, because truth is they are struggling to survive. And so artists get screwed because the likes of Spotify are struggling to make an unworkable model, workable. I don't know what the answer is, but I do know, we should be going back and looking at some of the basic assumptions and tenets and not just accepting that's the way they are because "everybody else charges that and it's a standard rate". That to mean sounds like a cartel. In an industry that has been very innovative over the last 50 years, that it is objectionable.

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Robert Saunders
Dec 21, 2013 12:31pm

In reply to Video Buddha:

I agree in general with your comments on digital delivery profit margins, but I'd really like to know how subscribing to Spotify affects music buying habits of subscribers. That's the big missing element of modelling how cash flows to the labels and artists, in the same way as radio plays presumably increase music sales. Of course Spotify is very different from radio, but still - its impact on music sales isn't really explored anywhere I know of.

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Scott
Dec 22, 2013 9:49am

In reply to Robert Saunders:

It doesn't need exploring, it's marketing 101.

If the product is available for free or incredibly cheap, no one is going to buy it.

For every Quietus reader who comes on here saying 'spotify is great! I listen to things, then buy it on Norman', there are many thousands of people who are going: 'it's brilliant now, music is free, and I don't have to have a bunch of shitty cds cluttering up my flat'

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Michael
Dec 22, 2013 11:57am

I'm always glad to see these articles after reading so many with such convoluted information. Sometimes that light of rationality needs to be turned a little brighter. It's funny when something seems so obvious, and yet is so horribly misunderstood, based, sometimes, on the words of others which are self-serving at best. I think streaming is fantastic. I can imagine the only obstacles would be record labels that don't earn as much as they used to. The music industry will never earn the same way again, but we kind of over paid before, so now it's getting back to a more realistic measure. Most of all I'm tired of the fan-shaming that goes on. If I choose to listen to an artist through spotify, or torch music, I'm doing it so that royalties will be paid out, rather than the nothing that they get if I pirate. I don't appreciate being shamed for how I legally listen to music. I expect this argument will continue to flair for another year or two, and then it'll be the norm and we'll all settle into our life of streaming until something new comes to shake it all up.

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Alex
Dec 22, 2013 5:48pm

In reply to ed:

I agree that the rate for subscriptions probably equates to the average contributions in the pre-streaming model. However, the issue is that non-average consumers historically tended to spend much more and have a wider listening range. With Spotify, instead you have the same amount (£9.99) divided between a wide range of artists. Essentially, the system works for artists whose fan base typically made a few purchases a year, but fails artists whose fan base used to purchase a lot more, because there is in effect a £9.99 cap on contributions. So a listener who would buy 3 albums per month @ £7.50 (36 a year £270), who now listens through Spotify is now contributing just £9.99 pm, or £120 per year to divide between those same 36 artists.

I think this is what Yorke et al are getting at. Unless an artist makes it into the mainstream (i.e. you can buy their CD at Tesco), the Spotify model massively limits their earning potential, as they will not be able to achieve sufficient plays to get a reasonable slice of the royalties. I agree that streaming is here to stay, but I don't think it does much to help smaller artists.

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Alex
Dec 22, 2013 5:58pm

In reply to Video Buddha:

"Spotify currently pays nearly 70% of their total earnings to rights holders and keeps the remaining 30%. It's a pretty standard royalty breakdown in the digital space today. If you build and sell an iPhone app, for example, Apple takes 30% from every sale. The same applies to Amazon if you sell an eBook in their Kindle store."

This I don't understand. How can the cost of running Spotify, iTunes or Amazon etc be 30% of the total digital media sales? Last time I checked, Bittorrent could distribute all content for zero (except for the minor computer resource costs). Claiming 30% is the biggest indicator that these distributors are the new powers trying to screw artists. It's based on market dominance and offering convenience to customers. A complete cartel, but one the public unfortunately buys into, because at the bottom line most people want something for cheap, rather than wanting to ensure the fair compensation of artists.

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David
Dec 28, 2013 3:23pm

I use both Spotify and Rhapsody streaming as a paid subscriber. I play through a Sonos System and use an iPhone to travel with albums and playlists. I have discovered multiple new and older artists that I have gone to see live.This revenue stream seems lost in the debate!

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fina man
Dec 28, 2013 4:18pm

A went with Peter Gabriel's endorsed "WE7" it does what I need didnt want spotify or i~tunes a prefer sound cloud an windows. Apple to me is the man!!!

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Mark
Dec 28, 2013 4:49pm

Video Buddha's comments about publishing are interesting. I have a publishing contract with a major international publishing house, and I receive 10% of gross. The novel's first run sold at £13.99, so I got £1.39 per sale. After the first year, it became a 'mass paperback' on a different imprint (same publishing house), and sold at £6.99. I get 69p per book sold. The e-Book deal is, horrifically, the same. My literary agent receives 15% of what I get. As an author, I pay 15% to an agent for their professional services (editing, negotiating contracts etc), and another, more difficult to discern, percentage to the publishing house for their services (editing, PR, printing, distribution). With my second novel, I am seriously wondering whether this traditional model is actually serving me anymore. Literary fiction sells fuck all; for every huge seller there are a thousand books like mine that shift a couple of thousand, max. Same goes for bands. It just so happens that I am in a band too, one with a record deal. It's one of those bands that sells a couple of thousand max. Like my novel, our albums stand virtually no chance of earning out their advances, if there was one, which often there isn't. My point is that the idea that the old model of the music industry was one where artists got paid properly for their work is not correct. Most never got paid, many should have been paid but were ripped off and will never be paid, and those that did get paid found that they were the last people to be paid, after their managers, agents, labels and publishers. The bands that can call the shots, the Radioheads, U2s, Led Zeppelins etc are thin on the ground indeed.

What Spotify and the new media landscape offers to artists is the ability to connect with international audiences, and we need to accept that the thing that was once controlled and had value (records/books) is now digitally replicable and in that digital form is about as close to valueless as can be. The thing which now has value is the artists time, which is why gigging has become the more lucrative part of a musician's activity. Also, we're now in a landscape where a smaller number of fans can support a bands efforts for more money via crowd-funding models. The freeloaders on Spotify and elsewhere will always be freeloaders, but maybe they create the environment where the exclusive vinyl issue (as an example) becomes the kind of artefact 300 people are willing to pay £25 for, and 9000 people are willing to pay £10 for a ticket on a tour (say, 60 gigs a year, 150 people at each gig).

And, as an author, 70% from Amazon (or 100% if I use a platform like DPD to distribute) looks a whole lot better than 10%, minus 15%.

These are thinking out loud comments, not really a position as such, but it certainly seems to me that the 20th century ideas of how entertainment products work is well and truly finished, and that smart artists will work out how to survive in this new ever-shifting model. Few people are going to get rich, or even make the same money they would of they did 40 hours a week at minimum wage, but that's not new.

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Heiner
Dec 28, 2013 4:57pm

I have spent a lot more on live music since I started using spotify. A lot of gigs were headlined by bands I would not have come across otherwise. Including merch I would guess that I spent over a thousand bucks on music (excl. spotify). So what if I don't buy the classical media? Even if I wouldn't have spent a Dollar, why should I feel guilty about using a legal platform that nobody is really forced to contribute to?

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not guilty
Dec 30, 2013 3:54pm

I have been buying music for decades and it has felt, at times, like an abusive relationship: remixes, exclusive tracks spread over multiple items, new albums re-issued with extra tracks within months, new formats, re-mastering, re-re-mastering etc… In the digital domain the carrot remains: 'album only' tracks etc. The music 'industry' has never played fair with its artists or its consumers: good riddance to it.

Someone listening 'for free' doesn't necessarily equate to a lost sale or 'theft': people will often have a passing interest in free stuff purely because it is free - add a price tag and they wouldn't be interested in the first place. Maybe musicians have to face the reality that they are in low paid work - like a lot of other people!

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Matthew
Dec 30, 2013 8:39pm

Streaming's completely reformed my listening habits. I used to download all my music illegally. Now I happily pay a monthly £7.99 fee for Google's All Access service. It's similar to Spotify but has two important advantages. Number one: I have my entire iTunes library uploaded onto their servers integrated and indexed beautifully into my library (not possible with Spotify); number two: I can add albums to my library (rather than Spotify's only method of making an individual playlist for each album). The interface is also much nicer, especially on mobile. It also has the ability to download tracks to your phone for offline listening.

I do buy the odd album or two when my budget permits, more often from smaller artists to help support them.

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Andre
Dec 31, 2013 12:37pm

Great article. It's clear that this is about a couple things:

1. Volume and "scaling" will exponentially explode the numbers paid out.

2. We need to remember that for better or worse.... Artists SIGNED THE DEALS with rights holders. This, to me, is a lesson for myself & fellow artists to READ THE FINE PRINT. Like all the complaints about Facebook can so this or that... Where the answer is "you clicked YES to start your Facebook account, and agreed to EVERYTHING they do and can do. Deal with it. There needs to be a huge shift in people understanding what it means to.... Sign on and AGREE to things.

Having said that, of course many artists has bad lawyers, and/or were outright lied to. But also many just didn't even skim the abstracts on their contract.

3. How come YouTube doesn't get the scathing attacks from Yorke et al?? It's FREE STREAMING, usually if illegal uploads.... And pays NOTHING to artists!!! They have mainstream car and movie and cosmetic ads... Generating billions. Where's the argument about paper trail from Beck on YouTube??

Unless the artist acts, illegal uploads are what drives the site. I love love love YouTube... But why the one sided attack on spotify, based on bad math and ignorance about the real figures ?

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Jeff Knowles
Jan 2, 2014 9:19pm

Thanks. Great article.

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Guilty
Jan 7, 2014 11:33am

Great coverage, thanks! Altogether with few comments, especialy the one by Alex, it lead me to one of the many ideas which might be also important (for indie artists), but are usualy left unnoticed. Correct me if I am wrong, but one of the main problems might be the huge pond itself – smaller labels and artits sharing the same economic space with big labels/names with the small dependent on the big ones.
Main axis of this discussion is always money centered – obviously. But If you look closer, for example on current strategy of Bandcamp, we might also discover that streaming services which are not paying for royalities (as Bandcamp does) could make sense in some ways. Of course streaming is part of the future and its not going anywhere. The question might be if entering the small pond of Bandcamp and other similar services wouldn't be better for small labels/artists. I assume, as far as I know Bandcamp, that most big labels/artists don't care about such services because the chance of profit is far less enticing for them. From my viewpoint it seems that Bandcamp works a bit like filter to some extent, attracting indie labels but far smaller number of big commercial stuff, again correct me if I am wrong. At least there is no profit at the expense of smaller ones. And when I think about the numbers which Alex mentioned I find this system far more fair.
As a producer you can chose and you can risk and work with both services and of course then you have to apply questions like: Would your fans buy the record on 12“ if they already payed for its streaming? Question is if the small pond wouldn't be better for you.

As listeners (industry calls them also customers) we should think about what it means to support your favourite artist 1) by the way of renting the music (streaming it) or 2) by buying it. There is a big differnece. True is that if you really want to make one time invest for the product you'll think twice if you are really going to support it but the revenue for the “indie“ artists might be (at least according to current numbers) still bigger then the one from Spotify + with services like Bandcamp your money goes directly to the artist, which I find important. Also the relationship between money and goods is far more clear here, then in the situation of streaming model where the artists are getting money for the clicks from listeners overall yearly investment for spotify subscription.

I generally find the way of avoiding industry influence far more sustainable for smaller artits. On the other hand I have to confess I find very intersting the idea which Dave Allen had point out in his „I disagree with David Byrne and his Spotify stance“ article, where he wrote: „...that Spotify has at least created a system where people actually pay for music? After all, musicians seem to be constantly complaining that *everyone* is stealing music (a complaint that I don’t agree with.)“ Me neither.

By the way I am not making some Bandcamp PR here but that's basicly the only service I used in long term scale.

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ersatz
Jan 7, 2014 10:47pm

One of the best articles I ever read, well done! The author raised some excellent points, especially the one that's most often used by supporters of Spotify, which is actually 100% true - it's a choice between streaming and stealing. Spotify in Poland - where I come from - was launched last February and I can't imagine my life without it now, I've been a subscriber almost since the beginning. As far as I can observe Spotify in Poland is used mostly by young people, students who can't afford ridiculously expensive physical albums (they're so expensive that it's even more affordable to buy an album online in a foreign shop and ship it to Poland; the relation between salaries and prices of music is absolutely absurd). There was no other option but to download music illegally. Thanks to Spotify it's changed. I observed an interesting process in my and my friends' behaviours - I can't remember when was the last time I downloaded an album illegally. What if it's not on Spotify? Spotify made me too lazy (or too used to its convenience) to even bother. Some people say that sales of physical albums are dropping because of the availability of limitless streaming. Perhaps. My friends and I, however, bought a couple of records by musicians we particularly liked. There's some kind of sentiment that tells you to buy a record you adore, and not just limit yourself to online streaming. I'm pretty sure that freely available streaming encouraged people to go to gigs though.

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graham
Jan 9, 2014 12:00pm

dear Quietus, the people you are defending at this online thieving company aren't people who made the music, they aren't people who nurtured the talent, they didn't invest in creating the talent in any way, they have no creative imput or any valued imput at all. They dont create opportunities for the creative people they take advantage of, they don't support them in their early years or through the hard times, they don't even pay them a reasonable sum when they use their work without asking. These are in their own words "Daniel Ek, a serial entrepreneur and technologist who started his first company in 1997 at the age of 14, co-founded Spotify in 2006 together with Martin Lorentzon.

Prior to Spotify, Daniel founded Advertigo, the online advertising company acquired by TradeDoubler, having previously held senior roles at Nordic auction company Tradera (acquired by Ebay). Daniel was also CTO at Stardoll, the fashion & entertainment community for tweens." or

"Martin first struck up his partnership with Daniel Ek when Tradedoubler, Europe’s largest affiliate sales network (founded by Martin), acquired Daniel’s company Advertigo in 2006.

Previously, Martin held senior roles at Telia, Altavista, Cell Ventures and NetStrategy. Martin studied at Chalmers and Handels in Gothenburg, before studying further in Stockholm. He has extensive knowledge of building companies and now sits on the board of TeliaSonera"

i suspect the kind of people the great bill hicks was talking about when he said 'if anyone here is in marketing or advertising...kill yourself. Thank you. Just planting seeds, planting seeds is all I'm doing. No joke here, really. Seriously, kill yourself, you have no rationalisation for what you do, you are Satan's little helpers. Kill yourself, kill yourself, kill yourself now. Now, back to the show. Seriously, I know the marketing people: 'There's gonna be a joke comin' up.' There's no fuckin' joke. Suck a tail pipe, hang yourself...borrow a pistol from an NRA buddy, do something...rid the world of your evil fuckin' presence"

there is no debate, no discussion, the deals have been done, in everyones favour but the artist. Your article is well researched but comes over more like a Spotify press release and failing to point out that major labels own 18% shares in spotify. As The Who said 'Meet the new boss
Same as the old boss"….wont get fooled again eh

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clark
Feb 18, 2014 5:51pm

It's easy to justify yourself when you don't make music as a career. Just because someone left the door open to the shop and no one is at the counter, doesn't mean stealing is okay. The tiny little revenue left was downloading music and now those little swedish genius' at spotify took that away as well. People wonder why the bar is so low with the quality of modern music. Because even the good artists have to have jobs to make ends meet. This is why I had to regrettably switch to ad music.

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