Spotify VS music industry

Spotify VS music industryspotify vs music industry

There’s a lot of buzz these days around music streaming subscription services and how they will impact the music business. It seems like every other week some famous artist is ranting about how much they hate Spotify, the world’s biggest music subscription service, complaining about their low royalty rates. To put it frankly, their vision is short-sighted. Below is my attempt to shed some light on this controversial subject, Spotify vs music industry. Here are the top 4 myths surrounding Spotify:

Myth 1: Spotify Doesn’t Pay Artists

If you’ve heard a single criticism against Spotify, it’s probably this. Since the service became popular, critics have claimed that Spotify doesn’t properly compensate artists for their content. While Spotify’s base payment might sound low at first glance, it’s important to review where that money actually goes. Obviously but importantly, Spotify does pay artists. Just because the service is “free” to non-Premium subscribers doesn’t mean that free users aren’t paying in some way. Those who assume because you can just download Spotify and start listening to music that it’s equivalent to piracy services like LimeWire haven’t done their basic research. If you’re a Premium subscriber, Spotify uses your monthly fee to pay out what it owes. Free users see ads instead, and those ads generate revenue that Spotify uses in lieu of payment.

Spotify used to feature a page on its site that detailed how they pay artists, but it’s no longer up. The exact payments Spotify doles out hinge on a number of factors, but as best we know it averages between £0.006 and £0.0084 per stream. Compare this to Apple’s iTunes, where most songs cost 99p. Apple takes a 30 percent cut of all sales, meaning that at best, an artist would make about 90 cents on one song download. This makes less than one cent per stream sound like a destitute wage, but consider how people use streaming services – they will be paid every time the song is played.

Recounting My Personal Experience

My favourite band is Red Hot Chili Peppers. I’ve listened to them since before I first became a Spotify user. Whenever they release a new album, I listen to it on Spotify because that’s the central location where I get all my music from. If I like the album (which I always have done) I will go buy a CD copy as well! This just means that people can listen to music for ‘free’ before going and buying a physical copy, which in the long run means that more copies are being sold because people don’t like to take a risk on what they are buying if they don’t like it.

For the foreseeable future, I’ll continue to stream their music regularly, and I’ve already listened to every one of their albums dozens of times. Because of this, Red Hot Chili Peppers have already made more money from me than if I’d simply bought each album once.

Simply put, a band’s fans will financially support them the same through Spotify as they would through buying CDs or with iTunes downloads. If you wouldn’t spend £10 to download a band’s album, you’re not going to give them too many Spotify listens, either.

This is all foregoing the fact that in most cases, record companies are the rights holders that Spotify pays out to. These go-betweens take some of the profits, too. Unfortunately, this is a reality of the music industry and is the same anywhere — it’s not Spotify’s problem. The company has a contract to pay out a certain amount to whoever owns the rights to the song. If a band has a contract with a record label, then the label has a legal right to that money. Independent bands take more of the profits since they don’t have to deal with the middle man.

Myth 2: Spotify Harms the Music Industry

We’ve confirmed that artists make money from Spotify, but what about the music industry at large? Taylor Swift claimed that Spotify is awful and pulled her music from the service, while The Beatles released their entire catalogue to streaming services at the end of 2015. What do these two different approaches show about Spotify’s effect on the industry?

Consider that Spotify has given people less of a reason to pirate music. In the early days of iTunes, your choices were to pay for a download or go the piracy route. Now, it only takes a few minutes to download Spotify, start an account, and listen to all the music you want. Even if people only casually listen to music on Spotify, that’s a legitimate use that benefits both the artists and the industry. It’s far healthier than the now-defunct Grooveshark, which many people used to illegally stream music for a decade.

It’s important to remember that many other mediums are trending towards streaming instead of ownership. Netflix lets you stream movies and PlayStation Now can stream PS4 games to your PC. In both cases, you don’t own the media that you’re consuming. It’s licensed for your use as long as you’re a paying customer. Streaming hasn’t killed either of those industries — actually, they’re adapting as the times change.

Additionally, Spotify gives smaller artists a better chance to break out than they’d have without it. Bands can link to their Spotify pages and playlists from anywhere — sending them to friends is an easy way to get their music out there. Further, Spotify’s regularly-updated playlists often feature up-and-coming artists. If a band gets their music selected for one of these mixes, they could see a great boost in popularity.

Myth 3: Spotify Has Totally Stopped Piracy

While Spotify has provided a wholesome alternative to stealing music, the problem isn’t going away anytime soon. Many people are happy to pay for a streaming subscription or live with ads in their music, but others aren’t for a couple of different reasons.

Although Spotify is good at bringing new releases to its catalogue right away, sometimes users have to wait a while.
When Kanye West released his album The Life of Pablo, he restricted it to the problematic Tidal service, stating that he would never release it anywhere else. Pablo didn’t come to Spotify for another 45 days after the album’s initial release. This means that Spotify subscribers who wanted to hear the album had to either pay up for the additional subscription or listen to it via other means — like piracy. That’s how over 500,000 people first listened to the record.

Spotify doesn’t have every music track known to man, so listeners who want to keep all their music in one place are likely to pirate the missing music and import it into Spotify manually. And it’s an unfortunate fact that we’ll always have people who pirate no matter what honest options are available. Whether they want to own music without paying for it or just don’t give a damn about the artist making money, Spotify isn’t going to tempt them away. Similarly, while listening to music on YouTube isn’t ideal, people have uploaded thousands of albums to YouTube for anyone to access. If the uploader doesn’t hold the rights to the music, doing so is creating an illegal copy and breaking the law.

Myth 4: Listening to Spotify Is Worse Than Vinyl

Since Spotify music streams to your computer instead of playing locally, its quality varies with the bit-rate. On the desktop app, the Standard setting for free users is 160 Kbps, while premium users can enjoy High quality at 320 Kbps. There are some people who say listening to music on vinyl is better than getting your music digitally because of the quality, but this isn’t true.

Vinyl audio is uncompressed analogue sound as opposed to Spotify’s compressed, digital sound, and music purists insist that it’s better. But can you really tell the difference? You might notice some dips at normal quality, but you’d be hard-pressed to find someone who can tell the difference between a vinyl record and a high-quality Spotify stream. A good pair of headphones with Spotify lets you enjoy your music cleanly, and comes without the crackling sound that some of us find annoying.

Aside from pure quality, Spotify’s digital music offers a tonne of benefits over vinyl. Records aren’t portable, require flipping to hear the entire album, and can cost $20 or more. A $10 Premium payment gets you a month of unlimited access to anything you want to listen to — why would you pay double that for one album?

10 Reasons Why Every Artist Should Be On Spotify

1. Subscription Services Promote Artists’ Catalogue Increasing Revenue All Around

There are billions of pounds/dollars to be made in the music streaming market. Apple, Google, and Amazon’s recent moves into streaming are expected to provide a revenue boost to labels and create fresh opportunities in the music industry.

The strategy is to market music through playlists and ultimately increase their catalogue’s Spotify streams.  By attracting followers to playlists based on themes and genres, they can then use those playlists to “seed” new tracks as they are released.  Think of this kind of marketing as a new form of radio promo where the taste-makers are the playlist curators and where anyone can be a curator.  Labels, distributors, artists, celebrities, brands, TV shows, music fans, etc, are all examples of curators on Spotify attracting followers to their playlists.

A song on a curated playlist may be how Spotify users discover you for the first time, but because they can consume your music affordably, some will listen to every song in your catalogue. This allows them to become a fan of you as an artist, rather than having to cherry-pick which singles to purchase. Many people wouldn’t have taken the opportunity to listen to your music in the first place if they had to purchase the music first before getting a chance to hear it. In countries where Spotify is really popular such as Sweden and Norway, hardly anyone is buying music and almost all revenue comes from streaming. This is why some artists can make 5-10 times more money on Spotify in these countries than in the U.S.

To acknowledge the elephant in the room, yes we all know that artists make a lot more money right away when fans purchase MP3’s but think of streaming as a dividend that pays you every time someone listens to your music. You will be surprised how quickly this money adds up as more people become paying subscribers.  Every day we are getting closer and closer to the tipping point where streaming revenue will surpass digital downloads and CD sales. After that happens, the sky’s the limit!

2. Curated Playlists Can Break A Hit

Dutch rapper Mr Probz song ‘Waves’ has over 2.4 million downloads globally and was streamed a million times a day on Spotify throughout summer.  ‘Waves’ received considerable support from club DJs in Europe, but how did it break America, travelling across the Atlantic and straight into the US Spotify top 40 chart just a few months after its initial release? Careful interpretation of data from the months when ‘Waves’ first started to break shows that the ‘lean back’ mechanism of curated playlists (as opposed to the ‘lean forward’ method of search which drove European streams) led to the early success of Mr. Probz in the US.

Put simply, the lean-back mechanism of Spotify’s curated playlists carried a big hit in Europe across borders with next to no conventional support in the U.S. for this new artist. By overlaying Spotify streams, Shazam tags and radio plays onto the same chart, what is really telling is that radio is seen to be lagging a full three months behind, and the actual number of its radio spins was barely noticeable.

3. Subscription Services Cultivate New Artists  

Music’s shift to an all-you-can-stream model has a hidden perk that could benefit everyone: Data. Spotify, which is available in over 60 countries, has been amassing listening data from its millions of users.  The marriage of data and music will have a major impact on the industry as a whole, a process you can already see beginning to unfold.  The rise of Lorde, for instance, was fueled in large part by Spotify. Their data team noticed the pop star was trending on the service long before she became an international star. Internally, the company has a team of people dedicated to spotting these trends and cultivating the artists behind them. They’re also working with traditional radio stations to help spot regional surges in popularity previously invisible to deejays.

4. Subscription Services Decrease Piracy

Studies have revealed that piracy rates are down by more than 80% in Norway. Norway continues to have the highest digital revenue per capita in the world, thanks to the rise of legal alternatives such as Spotify.  Australia’s piracy rates dropped 20% in just one year since Spotify launched.  Piracy fell by 25% in Sweden between 2009 and 2011. In North America, file sharing now accounts for less than 10% of total daily traffic.

5. Subscription Services Make the Average Music Consumer Spend More

Digital downloads have not been able to make up for the decrease in physical sales over the past 15 years. Spotify’s model aims to regenerate this lost value by producing far more value per listener. According to Russ Crupnick of NPD Group, a respected consultancy, of the U.S. Internet population of 190 million, only 45% buy the music of any form. The average annual music spend of this minority is only £55.45.  A Spotify Premium customer spends just under £120 (£9.99/month x 12 months) per year. A Spotify Premium user delivers more than 2x the amount of revenue to the industry (per year) than the average US music consumer. Spotify’s goal is to convince millions of people around the world to become Premium subscribers. By doing so we will re-grow the music industry.

6. Music Streaming Counts Towards Music Charts

On-demand audio streaming has been factored into the U.S. Billboard charts since 2012.  In 2013 Billboard added YouTube streaming enhancing a complex formula for Billboard’s Hot 100, the preeminent singles chart. That now includes on-demand audio/video streaming, digital downloads track sales, physical single sales, online radio streaming, and terrestrial radio airplay.  Never before have music fans had more of an influence on the chart’s rankings as they do today.

This year the UK added on-demand streams to the Top 40 singles chart. 100 streams will be weighted as the equivalent to one download or physical single in the chart compilation process.  Each song has to be streamed for 30 seconds to count as one stream. Subscription services which will contribute to the charts include Spotify, Deezer, Napser, O2 Tracks, Xbox Music and Sony Music Unlimited, and rara (powered by Omnifone). Video views on YouTube and Vevo will not count towards the charts.

7. Social & Concert Recommendations = Free Promotion

Spotify users can easily share what they are listening to via their activity feed within the desktop app, via a deep integration with Facebook which all their Facebook friends can see, and via direct messaging other users.  When people listen on Spotify it’s social and your fans become promoters just by listening. Spotify also automatically recommends nearby concerts to fans who listen to a lot of your music or follow you, and nearby concerts are shown to users visiting your artist discography page on Spotify.

8. Alerts & Notifications Makes It Easier To Stay In Touch

Spotify automatically generates notifications to your followers whenever you release new music so they never miss any of your releases. Notifications include email alerts, push mobile notifications and recommendations in the activity feed.

9. Subscription Services Pay Higher Rates Than Online Video, Online Radio, & Terrestrial Radio

Spotify pays 70 percent of “every dollar” that it receives back to its rights holders which are on par with other digital retailers. By “rights holders,” they are referring to the owners of the music that are on Spotify–labels, publishers, distributors, and, through certain digital distributors, independent artists themselves.  The rates Spotify pays to rights holders is much higher than many alternative services such as Youtube. Spotify is paying artists more than 2x the amount that popular video partners are paying out. In addition, they are paying significantly more than online and terrestrial radio stations.

10. Streaming Has Already Won 

Digital sales decreased for the first time last year. Weekly album sales hit new lows on a regular basis.  The public has made their choice, they want access over ownership.  For people resistant to change, you will always be able to get your favourite music in some physical form or as a download. I personally have both Spotify and my favourite albums on a physical copy (CD). As CDs and downloads continue to decline, vinyl sales surge.  But to ignore streaming is choosing to live in the past.  New cars or computers don’t even come with CD players anymore!

In the words of Bob Lefsetz, “Streaming won. Hell, it won in movies/TV first. We’re never going back to ownership. We’re never going back to windows.  So throw your sticks and stones. I don’t care, I’m on the winning side. I’m aware of progress. I can see where I’m going.  I’m not an ostrich with my head in the ground.”

Simply put, if you want to help save the music industry, use Spotify!

Based on this, what are your thoughts on Spotify vs music industry? Let us know in the comments below!

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