Spotify may be aiming to win the hearts and minds of app developers, but they still have some work to do when it comes to musicians.  We reported the early results of our Spotify survey here, and can now announce that the final results are…well, pretty much the same.  Once again:

  • When asked how they feel about Spotify as a listener, fans were twice as likely as musicians to profess their love.
  • When asked what they thought about Spotify from the musician’s perspective, musicians were three times as likely to feel the hate.

The survey is closed, but you can let us know how you feel in the comments below.

The first two responses to each question can be viewed as favorable, and the last two as unfavorable.  This time, 57% of musicians view Spotify favorably as a consumer, while the favorable rating from fans rose to 70%.

Looking at things from a musician’s perspective, 52% of fans rated Spotify as good or OK, vs. 43% of musicians.  The biggest split between fans and musicians is the 30% gap between those fans who hold an unfavorable view of Spotify from the musician’s perspective — just 18%, and the 48% of musicians who gave an unfavorable rating.

Also worth noting: 29% of fans don’t seem to care much about how Spotify works out for musicians. We did get a comment complaining that not sure, don’t know, and who cares are three different answers.  That’s (kind of) true, but since the survey page asks you to read this story first, it’s fair to say the not sure and don’t know answers betray a certain amount of indifference.

Why the hate?

Is it because streaming services like Spotify are “ghastly, malicious succubi suckling at the teat of artistic talent”? With 18% of their shares owned by major labels, and artists receiving fractions of a penny per stream, Spotify has managed to become the poster boy for everything that is wrong with both the old and new music industry when it comes to artist compensation.

Many of the issues with Spotify concern the ways independent labels are treated.  Zoe Keating did a nice job of summing up the controversy in a guest post she wrote for MMT.    According to Zoe, “the word on the street is that majors receive profits from Spotify’s advertising revenue and indies do not.”

The Guardian has reported conflicting statements on this, which may just reflect deals changing over time and differing in various countries.  In 2009, they wrote:

On Spotify, it seems, artists are not equal. There are indie labels that, as opposed to the majors and Merlin members, receive no advance, receive no minimum per stream and only get a 50% share of ad revenue on a pro-rata basis (which so far has amounted to next to nothing).

~ The Guardian – Behind the music: The real reason why the major labels love Spotify

Then in February 2011:

Though all deals with Spotify are covered by non-disclosure agreements (NDAs), it is well known in music industry circles that Universal was able to secure a minimum streaming rate for the ad-funded version of the site – something, it is understood, not even the other majors have been able to accomplish.

~ The Guardian – Spotify should give indies a fair deal on royalties

Assuming that there is difference in compensation, there are two basic questions to deal with:

  1. Fairness: why should indie labels and artists be paid less than major labels?
  2. Evasiveness: if Spotify has compelling reasons (or better, an algorithm) for different pay structures, why do they keep avoiding the question?

Since Spotify uses peer-to-peer technology to deliver their streams, I can see where it would be more expensive for them to manage tracks that are rarely requested. But that’s a quantitative problem that could be easily solved, and applied equally to both independent and major label artists.

What’s better for musicians: Spotify or Piracy?

It’s obvious from the survey results that not all musicians speak with one voice on Spotify.  Some say “hey — it’s better than piracy ” (well, actually it’s mostly Daniel Ek who says that).  Others argue that piracy is better than Spotify:

As an example, my own Spotify statements via CDBaby have thus far reported 4583 plays and paid me a grand total of $11.38, including precisely zero downloads via their own store – so in terms of raw financial return, 2 people torrenting my stuff and deciding to buy a CD or download, and/or go to a show would beat Spotify hands down.

~ Steve Lawson – Spotify, File-Sharing and Incomplete Statistics

Derek Webb makes a similar case when he says that giving music away is better than Spotify:

On Twitter, I recently said, “I make more money giving records away on @NoiseTrade (in exchange for info) than selling those same records on iTunes (let alone Spotify),” which resulted in some pretty interesting discussions.  I said that in response to questions I received after criticizing streaming services like Spotify, which claim to offer a viable alternative to “piracy,” when in reality they offer artists almost no meaningful revenue or fan connection.  And while iTunes is certainly a better financial model and more equitable for artists, it does almost nothing to connect the fans to the artists in a way that yields any long-term benefit.

~ Derek Webb – Giving it Away: How Free Music Makes More Than Sense

Spotify and Streams vs. Sales

In a response to Derek Webb’s post, Sam Fisher Jr. claims that both free and streaming music are undermining the ability for musicians to make a living:

Hard numbers:  sales have dropped for my releases by 25-35% since those releases became available on Spotify.  Streams have shot through the roof.  For instance, we received a $123 check for 34,000 streams.  Consumers are starving artists by streaming their music.

~ Sam Fisher Jr. – Don’t Believe the Hype

A recent study showed that Spotify and similar services increase access for artists, but reduce spending on higher-return formats like digital downloads and CDs.  After checking with the 238 independent labels distributed by STHoldngs, only four decided to stay on Spotify.

As a distributor we have to do what is best for our labels. The majority of which do not want their music on such services because of the poor revenues and the detrimental affect on sales. Add to that the feeling that their music loses its specialness by its exploitation as a low value/free commodity. Quoting one of our labels, ‘Let’s keep the music special, fuck Spotify’.

~ Wired – 200+ Labels Withdraw Their Music From Spotify: Are Its Fortunes Unravelling?

And it’s not just independent artists that are balking.  Coldplay decided to withhold their latest release, Mylo Xyloto from Spotify and other streaming services, presumably to maximize sales.  If more labels and artists decide to pull out, or to use streaming services for marketing samplers instead of streaming full catalogs, then the current instantiation of the celestial jukebox may be doomed.  We’ll look more closely at this as we continue our series Music 2.0: Battle of the Business Models.

Spotify, MOG and me

Spotify seems to garner the most (good and bad) press attention, but are they any worse than the other services when it comes to artist payments?  Maybe.  First, the disclosure: after comparing streaming services, I cancelled my Spotify Premium subscription and became a MOG affiliate, then a member of the MOG Music Network.

I think that both MOG and Spotify are fantastic resources from a music listener’s perspective.  I am conflicted when it comes to how they affect musicians.

For my own account, I don’t think either service changed the amount of money I pay for recorded music, mostly because I am very interested in audio quality and willing to pay for formats with higher fidelity.  This might change however, as technology improves and high definition streams become available.  The services have probably contributed to increasing the amount I spend on live performances and other artist revenue streams.

I doubt that the rates MOG pays are much different from those paid by Spotify.  The major labels are all shareholders in Spotifty, and both Universal Music Group and Sony Music have invested in MOG. But while Spotify seem to be tone-deaf to the complaints from musicians and independent labels, MOG at least sounds sympathetic and has answered some of the questions that Spotify continues to evade.

At the Digital Music Forum West earlier this year, MOG executive Anu Kirk said:

It sucks that right now artists are getting paid so little money by subscription services, but it sucks that artists are getting paid so little money by everyone.  Subscription services are paying out what they can, but there’s just a lot of music.

A lot of music, and not a lot of paying customers.  This, much more than streaming rates, is the real problem.  Spotify is losing money now, and this analysis suggests that rates will never rise above a fraction of a penny.

MOG CEO David Hyman thinks that with enough paying customers, streaming services can deliver more money than digital downloads.  Licensing costs are the biggest expense for these services, and without giving away precise figures, he offered the following comparison to Fast Company:

And even on iTunes, he says, the average consumer pays roughly $40 per year. “That’s like $3 and something-cents a month,” Hyman explains. “This is the average iTunes consumer: $3 and change. Out over every $10–again, this is just a ballpark, I’m not giving the exact number–but let’s say we pay $6 [per month] to the labels.”

“So, which one is going to make them more money?”

~ Fast Company – Spotify, Rdio, And MOG On Artist Payments: Don’t Blame Us

When asked about the criticism from indie labels and artists, Hyman responded “The indie labels get the same deals as major labels…How they negotiate their deals with their artists, I have no idea.”  Unfortunately, he went on to say: “I don’t know why indies would be different than a major. Maybe because nobody is listening to their music?”

Comments & respondents: back to our regularly scheduled survey

Respondents had the option of leaving comments for each question, a sampling appears below.  The majority of responses are still from the US (59%), with the UK again in second (14%) and the rest scattered around Europe. Two Canadians participated.  We do not know why.

Q. How do you feel about Spotify as a music listener?

Too many holes in it’s available music.

I like the product, but the forced integration with Facebook is making me reconsider. It is impossible to understate how stupid this move was. Hope you made a lot of money.

So far, it’s seems MOG’s library is a bit deeper, but it could just be the artists I’ve searched. Also, MOG offers 320kbps in it’s $5/mo package, whereas Spotify only gives it to $10/mo Premium subrscribers. I’m still deciding on which service to use.

Spotify seems to have more commercial music. Not great for finding underground and independent artists.

Q. How do you feel about Spotify from the musician’s perspective?

Gives the opportunity to listen to music before purchasing. If you have a great CD chances are you will score a purchase but if the CD is crap then you won’t, but I think it will motivate artist to make sure their albums are not one hit wonders.

I am writing this as an end user, I might have a different opinion from the other side of the fence!

It’s great to get the music out there, but the ‘revolution’ hasn’t finished yet….. so who knows what’s to come.