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Spotify, The Music Industry’s Last Chance?

Arts & Culture | March 10, 2015

It’s racked up 573 million YouTube views and spent 17 weeks on Billboard’s Top 100; at this point, it’s difficult not to have heard Taylor Swift’s “Blank Space” at least once since its release in late October. But while Swift’s incessantly catchy tunes seem inescapable, as of late, it has also become increasingly challenging to listen to her music—outside of the average mall, coffee shop, or commute—without sacrificing at least $1.29.

Taking a stand against Spotify’s artist compensation policies, in early November Swift removed her album 1989 from the popular music-streaming platform, as well as many other similar services, thereby forcing fans to purchase the album from iTunes, Amazon, or an actual record store. Her bold move elicited both criticism and acclaim, igniting a discourse on how we will consume music in the 21st century. As one examines the fairness of Spotify’s monetization policies, though, it’s also important to critically assess the benefits the platform provides for musicians and listeners alike.

Swift says that streaming threatens both the societal value of music and reasonable payment for its creators. In July, she claimed in a Wall Street Journal op-ed, “Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for.” More pointedly, the iconic singer-songwriter criticized Spotify in a post-removal interview with Yahoo, describing it as a “grand experiment” that does not fairly compensate the writers, producers, artists, or creators of music.

In response to Swift’s allegations, Spotify co-founder Daniel Ek published a blog post that aimed to disperse common misperceptions about how Spotify works, how much it pays, and what it means for the future of music. “Our whole reason for existence is to help fans find music and help artists connect with fans through a platform that protects them from piracy and pays them for their amazing work,” he wrote.

Ek did not dispute that artists deserve to be paid, but he argued that Spotify is helping the music industry more than it’s hurting it. “We don’t use music to drive sales of hardware or software,” he wrote. “We use music to get people to pay for music. The more we grow, the more we’ll pay you.”

With two simple numbers—0 and 2 billion—Ek emphasized Spotify’s contribution. Piracy, he pointed out, has not paid artists a penny for their work, but in its lifetime Spotify has handed out $2 billion to labels, publishers, and collecting societies to later distribute to musicians and their producers.

Conversely, Swift argued that the revenue received is not enough: In effect, for a song to cash $0.99, the typical price of an iTunes download, it must be streamed a total of 456 times. In addition, the increase of competition for Spotify from other online streaming sites has, in accordance with simple laws of supply and demand, lowered music prices, resulting in a decline in revenue from digital song downloads.

Does providing music for free make Spotify the enemy? Ek vehemently disagrees. Instead, he described Spotify as a tractable solution to a music industry that cannot sustain itself on an all-free or all-paid system. Spotify’s blended option, the “freemium model,” he explained, aims to link ‘free’ and ‘pay’ together to create a new music economy that encourages universal access to music while also compensating artists.

His main point: people will find a way a way to listen to music for free, and have mediums such as YouTube and music piracy to make their ventures effortless. But these avenues do not compensate artists at all, let alone fairly, for the music played there.

Thus, Spotify is a way to attempt to compensate artists while allowing a mass audience online access to a large catalog of music. The online streaming platform boasts 50 million active users, including 12.5 million subscribers, most of whom pay $120 per year. Of those subscribers, 80% started as free users.

Although Spotify gets revenue from advertisements and subscriptions rather than a “pay-per-song-stream” model, total royalties received per song can add up for popular artists or songs. For example, Pitbull and Ke$ha’s “Timber” garnered an impressive $269,000 in 2013 from 32.0 million streams.

“Timber” was just one song, and Spotify is just one platform for artist revenue. Yes, artists do not pocket the full sum of the earned money, but they didn’t when we bought the music from iTunes or on a CD either. Assuming that most bands belong to a label, an artist only actually obtains 9% of an iTunes digital purchase. Nor can one point to Spotify as a profit-hoarding cash cow, as the company pays out about 70% of its total revenue in royalties, and is currently facing the question of how it will prove itself sustainable with the rise of new free music mediums.

But beyond any controversy over proper compensation, Spotify facilitates the discovery of new talent, enabling up-and-coming artists to flourish and gain accessibility to a mass listening crowd.

Ek says this facet is one of Spotify’s strengths as a platform. “We’re connecting artists to fans they would never have otherwise found, and we’re paying them for every single listen. We’re not just streaming, we’re mainstreaming now, and that’s good for music makers and music lovers around the world,” he wrote.

These artists, without Taylor Swift’s avid fan base, would not be able to justify pulling their music from Spotify, David Holmes, an editor for tech publication Pando Daily points out. He told the Guardian that due to the recent recent downward trend for digital downloads, “Over time, if artists want their music to be heard in any meaningful way, they [will] need to be on a streaming service.”

More and more, music streaming is becoming a fact of life; it symbolizes an important cultural change in the way people consume music. The issue then becomes a matter of perspective. When criticizing Spotify compensation policies, it’s important to consider both the context of the 21st century music industry and the external benefits that streaming through Spotify provides to artists and listeners alike. Before attacking Spotify, critics should provide a tractable solution that will conserve the value of music through fair monetization while still appealing to a mainstream audience.

Image: Wikimedia Commons (via Creative Commons).