zoë keating

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.

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Zoe Keating is an avant cellist whose work has been previously featured on MMT.  At yesterday’s F8 Conference, Spotify Founder & CEO Daniel Ek said that he wanted to “develop a system that fairly compensates artists”.  Given the recent controversy over artist payments from Spotify, I thought “artists” was an interesting choice of words.  I asked Zoe for a response, here it is.

Artists who express opinions on subjects like politics or the music industry should expect to get a lot of negative feedback (“Shut up and make music!”).  I realize I’ve waded into waters that I’d be better off avoiding and I nervously await my impending doom.

Hypebot posted an article,  ”How Much Does a Band Earn From Each Music Platform“, which received enough comments that Spotify responded, “Spotify Responds to Artist Payments Controversy“. This in turn spawned another article, “Spotify Offers Additional Response to Independent Label Defections“.

A debate ensued in the comments and subsequently, a chap named Jay Frank wrote,  ”It’s not Spotify’s Fault That You Make So Little Money“.

For some reason I’ve found the entire subject compelling enough that I’ve foolishly squandered the precious hour of my one-year old’s naptime to write this. To me, the discussion is about a general philosophy of the world, but since it started with Spotify, here is my criticism.

It a killer app. Well designed. I like it as a listening platform. But what I think is totally wrong: Spotify pays different monies to different labels. As everyone is under NDA it its impossible to find out what those deals are but the word on the street is that majors receive profits from Spotify’s advertising revenue and indies do not. The end result is that a major artist makes more per play than an indie artist. Spotify doesn’t talk about this but The Guardian sums it up well.

That’s it. That’s my complaint: fairness.

If Spotify would level the playing field and make the distribution equal to all artists. I would lay off (and I am sure that my constant complaints are a total priority for them!). Now, if Spotify was to make those royalties algorithm-based, they’d have my full nerd support. For example if, thanks to their related algorithm,  people listen to small artist X after listening to large artist Y, then I could see that a particular play, not all of them, of artist Y could be ‘heavier’. However, if people end up at artist Y by searching for them directly, the play weight should reflect that. Data, do it with data!

But just to pay tracks from major labels more because they are major labels, that is so OLD. Where is the revolution in that?

Daniel Ek, Spotify’s CEO, posted a response to a question on Quora “How does Spotify split its contribution to artists?”

First, Spotify does not split anything directly with artists. Instead we have different layers of rights that Spotify has deals with. Those are record labels, publishers and collecting societies. Artists/Composers in their turn have deals with the above mentioned parties. The deals artists have with labels/publishers tend to differ quite a bit and therefore it’s impossible for me to say what an artist actually gets in the end.

Spotify has three buckets of revenue. We get revenue from advertising, subscriptions and paid downloads. All of them are very different as a subscription is €10, a song is roughly €1 and advertising is a pool of revenue based on ads per month. We share the vast majority of all revenue we get in to all the right-holders.

Our part in the end is not that different from how the Apple app store works, where Apple sells apps and get a small percentage. What makes it slightly complex is that we have many more layers of rights in many different countries.

It’s important also to mention that what Spotify is trying to do is to increase the amount of people who are consuming legal music. Our view is that there’s so many people enjoying music out there, every single day, but the massive portion of them are currently not paying anything. We are trying to bring them back to paying for music again.

~ Daniel Ek, Founder and CEO of Spotify

In the first paragraph. What Mr. Ek says is: artists have different deals with their labels, distributors and publishers.  Um, yeah! The question was not well asked, but I do think he cleverly avoided the gist. Next, he states “We share the vast majority of all revenue we get in to all the right-holders.“ Translation: some right-holders do not get shares of all the revenue….but what we share with everyone, I’m not telling if those percentages are equal.

In the third paragraph, Mr. Ek goes on to talk about how the Apple store works. It seems to me that he missed one of the key things about iTunes: All labels get the same deal from Apple. I’ll repeat that. Whatever an artist’s deal is with their label is….ALL LABELS….indies, majors, DIYers, boutique, whatever….get the SAME deal from Apple. In other words, its fair. Its a meritocracy. Whatever you think about Apple, this was and still is a revolutionary idea. In this meritocracy it is still up to the the indie or DIY artist do to take advantage of all that fairness, and they still might fail….but at least the system isn’t rigged before they even get started. As for the alternative to piracy bit, I’m going to make a bold statement and say that  independent and niche artists have never been worried about piracy.

Anyway, to bring this back to Mr Frank’s article, you’d think that fairness would be a totally reasonable thing for an independent artist to ask for, but apparently not. His gist is that indies should stop complaining about their tiny royalties and be happy to be there. That their music might be listened to is payment enough. He does make some pretty convincing arguments for independent artists to leave Spotify en masse, because really what is the point if they are neither listened to or paid properly when they are? Although he says if an artist leaves, they run the risk of total annihilation.

People want to be entertained by music, not have to hunt things down. It has to be easy, which is why Spotify has gained so much traction. If you manage to get an average music fan’s attention on your band for 2 seconds and they look on Spotify and it’s not there, do you know what they do? They move on to another song. And you’ve lost your chance of gaining a fan. And the royalty. The number of people who would then spend time searching for alternative listening methods is miniscule.

The only constant in this business is change, so I seriously doubt that Spotify is or will be the only music discovery app that people use. More importantly though, I think Mr. Frank ignores one of the major trends of the last decade: the rise of niche. The choices are not just Gaga-esque populartiy vs obscurity. While the press has focused on the demise of the traditional music industry, niche artists have quietly flourished. Using the internet to directly reach their respective audiences, niche artists make decent livings like they never could before. Not as glamourous perhaps, but small, efficient, and certainly more attainable.

The niche economy gets poo poo-ed by executives, but I don’t call the ability to feed, clothe and house my family 100% on my music income, insignificant (but its true, there might not be huge profits here for your shareholders).

If an artist is self-releasing and using a variable payment system to sell music (i.e. Bandcamp, Kickstarter, Vibedeck etc) in conjunction with flat-fee digital distribution (i.e. TuneCore), they don’t need to sell 100k copies of an album, 10k will do quite nicely (I say albums, because that’s what I sell more of, but it doesn’t matter. Make your music in whatever format your art is best expressed, be it a carefully composed album of songs, one song at a time, a 2 minute video, or a 45-minute symphony on vinyl).

How does streaming fit in here? In the niche model, music does not need to be readily and freely available everywhere. Niche artists have a valuable product that they should never be ashamed to charge for. What they need to do is polish their craft, put some music out for free, and be persistent in getting the story of direct listener support out there.  Although the music and the craft is key, I’d argue that in today’s world its more important for the artist’s story to be ubiquitous than for their music to be. The message that niche artists need listener support in order to create music will lead to sales, subscriptions, backing, etc.

Instead of music, I’m going to end on the exciting subject of lettuce. If you don’t mind your lettuce being nothing more than a crispy form of water, its much cheaper and convenient to buy it at the supermarket chain. However, I like my lettuce to be flavorful and I want to support my local farmers, so I buy lettuce at the micro farmers’ market every Friday. If I am really craving lettuce on Wednesday, I have to tough it out until Friday, but the payoff is truly delicious lettuce (I’m not kidding. I never got excited about salad before) and I know that all of my money is going to a farm two miles away (some idealistic young-folk I call the ‘Suspender People’ because they dress like amish hipsters and plow with horses). While I’m at the farmer’s market, I also get to chat and catch up with my neighbours….its a very satisfying experience all round.

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