2012 A Brief History Of Spotify, “It Increases Itunes Sales”… @SXSW #SXSW

Stop us if you’ve heard this one before… Spotify doesn’t cannibalize Itunes sales it actually increases them… Uh huh. That was the rap they wanted us to believe. Smart and cautious artists and labels seem to have been right by avoiding Spotify.

In 2014 Itunes sales are reported to have declined by 12-14% and that is pretty much directly attributed to the cannibalization done by Spotify.

So here’s what they said in 2012…

Spotify Plays Can Increase iTunes Sales. Here’s Proof! | TechCrunch

… there’s no evidence of Spotify or other streaming services negatively impacting music sales. More data like this could encourage artists and labels to promote their streaming music presences, and push acts like The Black Keys and Paul McCartney who’ve pulled their catalogues from Spotify to come back.

Spotify launches new apps, as Universal again defends the service| CMU

Paul Smernicki did some more defending at a Guardian conference. According to Music Ally, Smernick told the conference: “We’ve looked really really hard for evidence of cannibalisation, almost unobjectively. Across the business, we’ve been unable to find that evidence. And in [European] markets where Spotify has launched, the growth in the digital business has been about 40%, in territories where it doesn’t it’s around 10%. There’s a healthy ecosystem and it can be served by many of those services”.

Spotify chief: streaming services boost music sales | The Telegraph UK

Speaking to digital music site Evolver.fm in a pre-Grammys interview, Ek strenuously denied that his streaming service cannibalises sales of music through services such as Apple’s iTunes.

“There’s not a shred of data to suggest that. In fact, all the information available points to streaming services helping to drive sales,” he said.

Does Streaming Cannibalize Albums? | Billboard

Wilson points out that the number of digital downloads has increased-up 15% for albums and 6% for tracks in the first 46 weeks of 2012, according to SoundScan-suggesting that the widespread availability of free on-demand streaming hasn’t led to a sales apocalypse.

Rhapsody chief executive Jon Irwin says, “The only thing streaming music cannibalizes is piracy.”

So there you have it.  Three years later and meanwhile back on earth the actual effects of Spotify on the transactional sales of recorded music have been a disaster. Which is why there are major changes happening at the major labels as Spotify licenses come up for renewal.

Apple Announces Itunes One Dollar Albums and Ten Cent Song Downloads | Sillycon Daily News

Satire – but not by much.

Apple Computer announced today that for it’s Itunes Music Store to remain competitive in the digital distribution marketplace for music they would be changing their retail pricing of album downloads to one dollar and song downloads to 10 cents each. The pricing change will be effective on black Friday for this holiday season. “Since we purchased Beats music and are competing directly with Spotify we recognized the need for more competitive pricing structures based on what consumers may be willing to pay”, an Apple spokesman said. He continued, “Spotify has proven that as long as we’re paying 70% of gross, the retail pricing is irrelevant, irrelevant! We are even contemplating 10 cent albums and one cent songs to further achieve parity with music streaming services!”

Record label executives rejoiced in the move as one source exclaimed,” I don’t know why we didn’t think of reducing the retail price of downloads by 90% years ago. It’s still money, right? It’s so simple that this is really the only way to grow the business to $100b annually while competing with piracy.”



Reality for Indie Artists : Zoë Keating’s Annual Music Sales & Streaming Data @SXSW #SXSW

Zoë Keating released her Annual Music Sales & Streaming Data Spreadsheet a little bit ago and we stayed out of the fray, although we did also publish an update of the Music Streaming Price Index for 2014 as well.

This quote from Zoë in a follow up post about her open and transparent sharing of information on Hypebot got our attention.

I want you to know that I don’t release these numbers as a marketing tool. I’ve always tabulated stuff as part of doing my annual accounting and last year I decided to make a portion of them public. Music commentators were saying, over and over, that artists are not making a living selling music, they make all their money touring, etcetera etcetera. I noted that in my case that wasn’t true and never had been. In the commentary I wasn’t seeing a lot of actual numbers from artists and thought I’d offer some details of how it all works for me: a non-labeled artist whose career has existed entirely in the internet-age.

It’s curious to us that someone would insinuate the motivation behind sharing information in an open, human and transparent way was an attempt at self serving marketing. Shame on those who have made such comments. Zoë should be celebrated for doing what the interweb companies claim to do, and ask others to do, but do not do themselves.

We also found the following statement to be true of our experience of the vast number of artists we hear from who report similar experiences with streaming services ranging from Spotify to YouTube. These services only financially serve the very large artists and the very large labels. In other words, Spotify, YouTube and the like have not empowered artists towards financial freedom and very well appear to be achieving the very opposite.

Meanwhile yes, the big money is to be made at the top of the tail…and therein lies the promise of commercial music streaming services. It will be financially valuable to those who make hits and those who aggregate legions of artists. For a single artist like me commercial streaming will never be more than promo. I accept that. But will keep talking about it until streaming companies do more to make that promo more useful (i.e data).

But there appears to be more to this story. In this recently posted video clip by “Unsound” documentary  filmmaker Mikeal Eldridge, Zoë reveals that she has dug a bit deeper into the realities of streaming economics noting that the more streams that are served, the less the artists makes per stream. Again, this is consistent with her observation that “the promise of commercial music streaming services… will be financially valuable to those who make hits and those who aggregate legions of artists.”

We’ve yet to see anyone propose how streaming can actually scale and be sustainable for artists. We love streaming services, what we don’t like are the economics.

92% of Zoë’s recording income is from transactional digital sales. If these streaming businesses are claiming to be the future, the question to ask is whose future?

Downloads Streams Total % Downloads
$75,341 $6,380 $81,721 92%


Music Streaming Math, Can It All Add Up?

Why Spotify is not Netflix (But Maybe It Should Be)

Musicians POV: Spotify Isn’t Good for You – Full Post

On Spotify (and Why I’m not a Conspiracy Theorist After All) | Tape Op

The real reason why the major labels love Spotify | Guardian UK

Digital albums overtake CDs in the US, but iTunes music revenues down | Music Ally

We’re more interested in its estimates for the revenue growth in 2013 of the various content categories in iTunes: apps up 105%, video up 19%, but music downloads down 14% of the year.

Streaming music’s impact isn’t a surprise, but it’s good to have more data to quantify what’s happening – albeit without the corresponding global increase in revenues from streaming services.


Two Simple Facts about Technology and Piracy : iTunes Vs. YouTube

Fact number one.

Unlike Google’s YouTube, Apple’s Itunes Store does not have a piracy problem, nor does it have an unmanageable issue with DMCA notices. This is often explained that this is because Apple does not allow user generated content from just anyone, therefore there is a barrier to entry that prevents such issues. But this is simply just not true, anyone can upload an album of music to Itunes using any one of the third party aggregation services such as Tunecore or CDbaby. And yet, there are not (as far as we know) hundreds or thousands of DMCA notices and content take downs on Itunes per day, as there are on YouTube. So why is this? In a word, intent.

If Apple, Spotify, Amazon and virtually every other legal and licensed distributor of digital music can put into place, the checks and balances that are capable of managing these rights effectively why is it so hard for Google to do the same YouTube? Think about it.

Fact number two.

YouTube can effectively filter content if it wants to. Since day one, we have never, ever seen any live porn on YouTube. Not a single live link to porn, ever. In debates in various online forums we have often proposed the challenge to anyone to present an active live link to full fledged porn on YouTube. It has NEVER happened. No one has EVER been able to present a live link to an active porn video on YouTube in the six plus years we and our friends have presented the challenge. Talk about a crowd sourcing FAIL.

What these two facts reveal is that rights management online, the protection of copyrights and the enforcement of Intellectual Property require nothing more than the intent and will to do so. But don’t take our word for it, listen to Google’s own Chief Economist Hal A Varian from his book “Information Rules” where he describes “Bitlegging.”

“Bitlegging” can’t be ignored: there’s no doubt that it can be a significant drag on profits.

Bitleggers have the same problem that any other sellers of contraband material have: they have to pet potential customers know how to find them. But if they advertise their location to potential customers, they also advertise their location to law enforcement authorities. In the contraband business it pays to advertise… but not too much.

This puts a natural limit on the size of for-profit illegal activities: the bigger they get, the more likely they are to get caught. Digital piracy can’t be eliminated, any more than any other kind of illegal activity, but it can be kept under control. All that is required is the political will to enforce intellectual property rights.

So Apple, Amazon, Spotify (and hundreds of others) can effectively manage digital distribution without triggering millions of DMCA notices. YouTube can effectively filter porn, and yet the internet is not broken as best as we can tell.

Maybe, just maybe this isn’t so complicated after all. That is unless one has a specific intent and motive from which they perhaps profit from the mass scale aiding of commercial level infringement.

Ending Decade Old Arguments : How the Promise of the Internet has Failed Artists and Musicians…

As Jaron Lanier tells it, Ted Nelson envisioned his version of the internet (Xanadu) as a single walled garden where everyone could be both a consumer and a producer. Ideas and art could be exchanged in a frictionless environment where a truly free market would emerge. People could make their wares available for free, or charge for them. However, once a price was set, the market would then determine the demand for that information be it a song, poem, movie or software. This truly free and open market would have empowered creators of all kinds access to a marketplace the likes of which we’ve never seen. Ted’s vision would have truly empowered creators and democratized distribution. Unfortunately, Ted’s vision has not come to be.

Much has been written about the record industry in particular failing to “adapt and evolve” to the new online digital economy. Whereas this may have been a valid argument in 2002 it holds little water a decade later in 2012. In the past decade we’ve seen many new offerings to consumers for legal and licensed music services tailored to many different consumer lifestyles. The tip of the iceberg includes such well known offerings as Itunes, Spotify, Pandora, Rhapsody and literally hundreds of others. And yet despite there being over 500 legal music services neither sales nor revenue have begun any significant rebound. The one thing these services still require, that piracy does not, is payment.

Let’s take a look back. In 1999 in the USA there were probably ten thousand retail points of sale for physical music, Tower, Sam Goody, Target, Walmart, etc. At the time they were selling $20 dollar physical discs – much of the overhead due to physical packaging, manufacturing, shipping, stocking fees and the overhead of real human beings being employed in record stores who need to eat, have shelter, etc.

These physical retail locations also had all the problems of supply side inventory management – a band would be on tour, and no stock would be in that market, a song would be played on the radio and the album would quickly be out of stock, etc. An artist could get placed on a TV show or featured in a commercial and suddenly there is demand, but no availability. These supply side inventory issues combined with limited points of sale were a massive problem for the artists and the record industry.

Digital distribution has none of these problems. Today someone can walk from their living room to their computer (or it may be on their lap) to purchase the latest hot song, featured in Gossip Girl. Or not even, they can buy the song/album on their iphone while watching the TV show or in a movie theater or at a club or concert.

So today in 2012 there are an estimated 500 million retail points of sale for prerecorded music via itunes alone. Just stop and think about this for a second. We went from ten thousand points of sale to five hundred million points of sale in less than a decade and removed all of the supply side inventory issues… wow. The promise, size and scale of the internet should have seen sales of pre-recorded music increase, massively.

There is frequent argument made that if music cost less, it would sell more… well, we now have 99 cent songs and $9.99 albums and sales have dropped by half in a decade…

So the recording industry adapted by:
1) removing inventory problems
2) making music instantly available
3) allowing for songs to be sold individually at a price never before possible and…
4) dropped the price of the album by half of the retail list price of a decade ago

All of this should be a net positive, not a net negative except for one very big thing, payment is now optional to everyone, and there are no consequences for not paying… So let’s be clear about what the problem is when talking about potential solutions.

The problem is not a lack of viable new business models, the problem is the proliferation of illegally distributed recordings being monetized by advertising on infringing websites. There is money in the distribution of recordings on the internet, the problem is the majority of that money is being made illegally and not paying the artists a penny.