At Thinking Digital 2013, Aral Balkan delivered the most watched and favourited Thinking Digital talk of all time.
In 2014, Aral returned to Thinking Digital to deliver a blistering talk about the state of the Internet today. He argues that “free is a lie” and that we (via our personal data) are all being quietly farmed for profit by the superpowers of the Web.
Will Spotify IPO Show Managers and Artists Got Options and Stock? Who Will Get Legal Scrutiny?
I can’t wait for the Spotify IPO filing. That’s when Spotify must disclose all kinds of things. Like which artists, artists representatives and managers got stock options.
It’s entirely possible that a bunch of artists and managers are gonna find themselves on the wrong end of the Securities and Exchange Commission’s pointy stick.
Why? When you present yourself as an expert in the music business and sing the praises of a music business company going public without disclosing that you have a financial stake you can end up in a lot of trouble.
Those managers, artist representatives and artists who have been blogging or writing guest editorials concerning the financial viability of Spotify and streaming have the biggest problems. An attorney can argue that they were part of a conspiracy to defraud investors if the company goes belly up because it has no viable business model.
Even those that spoke at the invitation-only Spotify meetings the last few weeks may be in trouble as well. There may have been potential investors in the room or what was said may get repeated to potential investors. The SEC doesn’t like it when you don’t disclose your financial stake in those situations public or private.
If someone somewhere knows that the company is a piece of shit this is PUMP AND DUMP and then EVERYONE gets investigated. And if you didn’t disclose your financial stake in the company? You’re gonna look guilty whether you are or not. Might as well put a big target on your back.
Shit, you may be in trouble if you took anything of value from Spotify? Data? Promotion? Promise of a job?
Doesn’t matter how smart you may think you are, it just takes one idiot to screw it up for everyone.
So how do we know that Spotify is gonna tank? Do the math. $5 a month streaming subscription even at 100 million households (the penetration of cable and satellite) 70% of revenue to rightsholders means that recorded music is a $4.2 billion dollar business. That is mass adoption of Spotify shrinks the business dramatically from it’s current 7 billion. THIS IS SIMPLE MATH AND ANY EXECUTIVE WHO CAN”T DO THIS MATH SHOULD BE FIRED.
But it is highly unlikely that all the streaming services put together will ever reach that level of paid subscriptions. Why? they offer a free version. Why would 100 million subscribers pay for something they get for free? It’s more likely that streaming creates a much more dramatic drop in recorded music revenue.
Do you think someone like Lucian Grainge is gonna let his revenue get cut in half? or worse? No he isn’t. Therefore Spotify in it’s current incarnation and model dies. If you don’t want to be investigated by the SEC you better hope that this happens before the IPO.
We also believe (we have access to Soundscan too!) the widely reported dramatic drop in paid downloads radically understates the problem to record labels. Digital downloads have a higher “net” to the recorded music business than physical sales. Physical sales have much higher expenses associated with their manufacture, distribution and delivery. Outside of the magic unicorn land of Silicon Valley, profits do matter. And profits are gonna get nuked this year. This means real job cuts and real salary reductions.
Finally we should mention we had moles in many meetings on the recent Spotify roadshow. Including the manager only meetings. WE KNOW WHO ATTENDED AND WHAT WAS SAID. This could really end up being a shit show.
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Later this week: How record executives may be PERSONALLY liable in potential lawsuits that argue that artists were defrauded in the deals labels cut with Spotify.
Is Google still serving ads on illegal sites?
I searched a website during my panel at Columbia Law School. It’s a website that is well known for infringing content. I also captured the source code. There is code on this website that shows this site is expecting advertising from parts of Google’s Advertising ecosystem. I have reason to believe this site and advertising code will shortly disappear. II post these screenshots here to preserve the evidence.
Dilandau.eu (redirectes to dilandua.la) by Google’s own DMCA Transparency Report ranks this site as #3 in the number of takedown notices received.
Here is website.
“served” source code clearly showing the website is expecting “ads by google” to be served into this page. It also displays some sort of publisher ID which would presumably identify this website to the Google Ad servers.
A second block of code farther down the page which also seems to be waiting for google ads to be served. Again note the publisher ID.
Why Spotify is not Netflix (But Maybe It Should Be)
From the “Let’s start talking solutions” file. If Spotify wants to have a conversation with musicians, this may be a starting point for an honest partnership. Let’s see more flexibility in the model.
If we are to explore the digital marketplace for both streaming and transactional downloads the music business might do well to look at what the film business is actually doing in the same space. We will quickly see that Spotify is not Netflix, but maybe it should be.
Readers will note the film business has not bought into the faulty logic that the only way to combat internet piracy is to make every film ever made, available instantly, on an all you can eat service for $9.99 a month. Some might argue that is what Netflix is, but people making that argument are obviously not current subscribers!
One thing that has struck us in the comparisons between Spotify and Netflix is that Netflix does not have every film, or even every current film, or even a large percentage of popular films. For the vast inventory that Netflix has, you also…
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We Got Trouble My Friends, Right Here in Music City: The Spotify Meltdown Tour Continues
I think we’re being run by maniacs for maniacal ends.
John Lennon
The Spotify “artist relations” team continued their swing West last night with a stop in Nashville at City Winery where a songwriter can grab a burger and a glass of red for a mere 350,000 plays–including tip! And don’t forget to take home a bottle of Tres Amigos, a disruptive little house blend of malbec, bonarda and cab for a modestly priced 400,000 plays.
Now here’s the problem–the Featured Artist Coalition spent a good deal of time putting together these meetings with the best of intentions. Although I was not present (I live in a flyover state, and you know how that can be), it appears to me that Spotify seems to think that these three events in New York, Nashville and Los Angeles are opportunities to sell their company by repeating their talking points as opposed to…
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Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?
We don’t know if the rumors are true, but we’re hearing rumblings from the upper echelons of the music business that top management is very unhappy with the cannibalization of the transactional business that is being accelerated in a death spiral towards a $3b record industry.
Did you guys get this headline on the midyear sales figures, U.S. Music Revenues Down Nearly 5%, Says RIAA. Early end of year estimates are that 2014 could see a double digit year to year drop by as much as 12%. As we’ve said before (and others are catching up) it’s just math.
We’re also hearing panicked and desperate distribution executives wanting to double down on streaming by reducing the subscription fees to accelerate scale (not everything Apple says is good for you, remember?).
So we have to ask, are you kidding us? The only thing that is going to accelerate is how fast you lose your job as you kill what’s left of the transactional business.
If you own a calculator, let’s just do the math one more time, real slow and simple like…
1) Spotify and former uTorrent CEO Daniel Ek says Spotify only needs 40m paid subscribers for streaming to be sustainable for artists. But that math just doesn’t work.
2) $10 per month subscription = $120 per year per subscriber
3) $120 per year, per subscriber paying out 70% of gross to rights holders equals $84 per subscriber, per year.
4) $84 per subscriber, per year x’s 40 million subscribers equals $3.4b per year in top line gross revenue to ALL rights holders. That’s $3.4b for labels, artists, publishers and songwriters combined.
5) $3.4b per year is HALF of the current revenue of $7b per year where the domestic business has been flat lined.
6) Assuming you could DOUBLE the subscription base to 80m PAID in the USA within two years by dropping the price in HALF to $5 per subscriber per month you still only gross (wait for it…) $3.4b a year in revenue.
We know this is shocking to the math impaired, but doubling scale (imagined as it is) while cutting the subscription fees in half, actually nets you the same amount of money. Shocking the things one can learn with a calculator or a spreadsheet.
Do you know how else you can achieve scale faster? Free. Free scales fast.
Free scaled fast for Napster.
Free scaled fast for Grockster.
Free scaled fast for Kazaa.
Free scaled fast for Limewire.
Free scaled fast for BitTorrent.
Free scaled fast for The Pirate Bay.
Free scaled fast for YouTube.
All of these have three things in common.
1) Infringement as a business.
2) Fast scale.
3) Subsidized by artists and rights holders who are not compensated.
The con men have been conned and the only way out is an exit strategy that is so disconnected from the monetization of music that there is literally no longer a connection between the artist and the revenue they create.
So how realistic is that magic number of 40m paid Spotify subscribers in the US?
Here’s what subscription based services look like right now. Netflix only has 36m subscribers in the US, no free tier, and massive limitations on available titles of both catalog and new releases. Sirius XM, 26.3m in the US as a non-interactive curated service installed in homes, cars and accessible online. Premium Cable has 56m subscribers in the US paying much more than $10 a month and also with many limitations. Spotify… 3m paid subscribers in the US after four years. Tell us again about this strategy of “waiting for scale.” Three Million Paid… Three…
* 3m Spotify Subs Screen Shot
* 26.3m Sirius XM Subs Screen Shot
* 36m Netflix Subs Screen Shot
* 56m Premium Cable Subs Screen Shot
* $7b Music Business Screen Shot
Given the above it’s not surprising that what we’re hearing is that the adults have let the children play with their Silicon Valley toys and they have been left alone along long enough to see the house burn down. And adding insult to injury, Spotify has been a complete artist relations disaster.
We’ve got bad news for digital distribution/ label folk. The Silicon Valley lifeboat doesn’t have that much room in it for ex-record company executives who are bad at simple math. We know five guys who are not concerned about the future of the record industry and their names are Jimmy, Dre, Trent, Ian and Dave… the rest of you are probably not going to be so lucky.
What is perhaps the greatest irony in all of this is that the great rock & roll swindle has been on the record industry instead of by the record industry, but that’s another post.
So who’s head is going to be on the block when the year end head count reductions start? Hmmm…
Remember kids, It’s just math…
RELATED:
Spotify Doesn’t Kill Music Sales like Smoking Doesn’t Cause Cancer…
Why Spotify is not Netflix (But Maybe It Should Be)
Spotify’s Daniel Ek is Really Bad At Simple Math, “Artists Will Make a Decent Living Off Streaming In Just a Few Years”
c3 ”#thatsongwhen 10k people listened, the artist got paid $60 and the major labels got stock options.”
c3, The Content Creators Coalition is enlisting musicians and songwriters to share their true stories of Spotify plays, payments and thoughts to raise awareness around unsustainable digital service royalty structures. Join in.
If you care about the economic rights of artists in the digital domain, join us in hijacking Spotify’s new twitter hashtag campaign. Got your own numbers to share? Like so: Fun with new Spotify hashtag campaign: “#thatsongwhen 10k people listened, the artist got paid $60 and the major labels got stock options.”
We do believe in digital. But current rates are not sustainable. Spotify is using our music like venture capital and promising better returns later while they pay their employees and hire expensive ad firms to create the above hashtag campaign.
FOLLOW c3 ON FACEBOOK:
https://www.facebook.com/ContentCreatorsCoalition
https://www.facebook.com/pages/ccc-nycorg/
Meltdown at the Soho House: Spotify’s Artist Charm Offensive Tour Self-Destructs on Opening Night
Uh oh…
Spotify is conducting a artist relations charm offensive in New York, Nashville and Los Angeles. (This is a time to be thankful I live in a flyover state–they won’t be coming to Austin!)
The idea was there would be a meeting at the toney Soho House in New York, a membership only location that costs more to join than most artists make in a year or two. Of course, Spotify no doubt has a corporate membership for impressing…business people. Right. Business people.
What Spotify wasn’t expecting was a bunch of feisty artists who were not on the payroll who came expecting actual answers and not shillery.
Here are three of the many issues that Spotify were confronted with:
1. “The Per-Stream Royalty Will Never Increase“: There was a big dustup over royalty rates that boils down to why should artists take it in the shorts while Spotify executives…
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* BREAKING * Spotify Launches Secret ‘Information Tour’ to Convince Top Artists… | DMN
Breaking from Digital Music News:
Currently, we know of three confirmed dates in the US: October 6th (ie, today) at the Soho Club in New York, October 8th at City Winery in Nashville, and October 10th at a private residence in Los Angeles (complete details on these dates below). The US-based sessions that we know about are being coordinated through the Music Managers’ Forum (MMF), with the Featured Artists’ Coalition (FAC) potentially bringing serious, high-wattage superstars to the table.
TO ATTEND PLEASE RSVP TO: fiona@thefac.org
READ THE FULL POST AT:
http://www.digitalmusicnews.com/permalink/2014/10/06/spotify-launches-information-tour-convince-top-artists
RELATED:
Five Important Questions For Spotify from Artists and Managers
A Tale of Two Pirates? Daniel Ek (uTorrent) and Kim Dotcom (Megaupload)
Music Streaming Math, Can It All Add Up?
A Tale of Two Pirates? Daniel Ek (uTorrent) and Kim Dotcom (Megaupload)
Perhaps it is ironic that Kim Dotcom is the arch nemesis of the record industry while Spotify CEO Daniel Ek is celebrated as the former Co-Founder and CEO of uTorrent. uTorrent is described as “the world’s most popular BitTorrent client with more than 100 million downloads” on Mr. Ek’s Wikipedia page.
This week the embattled Dotcom is said to have given up his stake (and shares) in his much ballyhooed digital music company Baboom.
In the screen shot below from the TechCrunch, “CrunchBase” we see the BitTorrent cast of characters we’ve gotten to know so well sharing duties at uTorrent. Here we have Bram Cohen, Matt Mason and of course former uTorrent Co-Founder and CEO Daniel Ek (still prominently displayed).
In many ways both Ek and Dotcom represent the same devaluation and destruction of the arts by building personal fortunes as the result of monetizing the work of creators, without paying those creators for their work.
The cost of music is not in the distribution of music, the cost of music is in the creation of music.
Megaupload and uTorrent have monetized the mass scale distribution of infringing works for profit. In other words, infringement as a business model where the cost of goods goes unpaid and creators are uncompensated. uTorrent is self described as “a free-of-charge, ad-supported, closed source BitTorrent Client.” Megaupload and uTorrent have both relied heavily on advertising for revenue.
Mr. Ek like his previous cohorts Bram Cohen and Matt Mason would like to say that BitTorrent is not a piracy platform, however multiple independent studies have repeatedly concluded that 99% or more of the files being distributed via BitTorrent are in fact, infringing.
All of this of course points to the fact that Megaupload and BitTorrent have hidden behind the DMCA, which has failed at it’s intent to protect artists. It could be argued that uTorrent and Megaupload have participated in business models enabling one of the largest transfers of wealth in history from individual creators to Silicon Valley companies and operatives.
Daniel Ek is reported to have a net personal wealth valued at $400 Million Dollars. Kim Dotcom’s fortune has been recently estimated to be $200 Million Dollars.
“The main reason music streaming services are winning over millions of consumers is the fact that they require no payment unless the user desires to pay.” – Music Streaming vs. Music Piracy | Medium.Com
Right now there is little functional difference to most musicians between music streaming and music piracy. This realization should not come as a surprise to musicians when they learn that the CEO of the largest and most used on demand streaming company was both the Co-Founder and CEO of uTorrent, “the world’s most popular BitTorrent client with more than 100 million downloads.”
If Spotify wants musicians to take it seriously, perhaps it’s time for a CEO musicians can respect. The record industry might also want to reconsider who it chooses as friend and foe as well. More on that later…
The Trichordist 
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