Spotify Desperately Doubles Down on Dumb Bad Math… Free Doesn’t Pay, It’s Just Math.

Bring out your shills… It’s no surprise that Spotify has once again enlisted it’s shills and PR machinery to defend it’s exploitation of artists, bad business model, and horrible royalties. The latest offensive comes as the major labels have announced that the unlimited free tier is not working for them (go figure, free doesn’t pay?).

Last year we wondered out loud, Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization? In February of this year we found out when Rob Wells exited his post at UMG. Around the same time public comments were made by Lucian Grainge for the need to get more paid subscription revenue. He also noted that the free tiers are not creating the type of performance required for a sustainable ecosystem of recorded music sales. Sony music chief Doug Morris has also come to the party stating, “In general, free is death.

Generally speaking we’re not often fans of major labels (remember they have 18% equity in Spotify) but we’re glad they’ve gotten out the calculators. Right now, the three major labels are currently reviewing their licenses with Spotify which are up for renewal this year. This is the time for the major labels to renegotiate those licenses to be more fair for artists.

We’ve detailed the math here, Music Streaming Math Can It All Add Up? In that post we look at the numbers based only upon paying subscribers. The bottom line is that even at the current rate of $9.99 (per month, per subscriber) it’s going to take a lot more paying subscribers to even get close to the type of revenue earned from transactional sales. Free, ad supported revenue, not even close.

Here’s a couple more things to keep in mind that we’ve detailed:

* Spotify Per Stream Rates Drop as Service Adds More Users…

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* USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue

But perhaps the worst part of Spotify was outlined by Sharky Laguna’s editorial, “The Real Reason Why The Spotify Model Is Broken.” The well written piece details how the artist you play, may not be the artist who get’s paid due to the fixed revenue pool and market share distribution of revenues.

Now keep in mind we’re not anti-streaming. We completely believe that streaming is the future of music distribution and delivery. None of our arguments here are anti-streaming or anti-technology.

Our arguments are anti-exploitation and anti-bad business models. Technology and economics are different issues. We detailed our thoughts for moving forward with potential solutions in our post Streaming Is The Future, Spotify Is Not, Let’s Talk Solutions. We look at five practices that can make streaming music economics viable for all stakeholders and generate the revenue required for a sustainable ecosystem.

When a Spotify rep says, “We think the model works” keep this in mind as we review the Spotify Time Machine…

* 2010 A Brief History Of Spotify, “How Much Do Artists Make?” @SXSW #SXSW

Back in 2010 during Daniel Ek’s Keynote Speech an audience member who identified themselves as an independent musician asked how much activity it would take on Spotify to earn just one US Dollar. The 27 year old wunderkind and CEO of the company was stumped for an answer… Five years later we have a pretty good idea why.

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

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.

Of course, that was until this past year when Itunes sales are reported to have declined by 13-14% and that is pretty much directly attributed to the cannibalization done by Spotify. Hello…

It is said that one of the definitions of insanity is to keep doing the same thing while expecting different results. Our suggestion to the those in positions of power is simply this, if  you want something different, you have to be willing to do something different.

Sure, Spotify was a grand experiment but after half a decade we now have the data to know if that experiment is working out (or not). In the end, it’s just math and free doesn’t pay…

 


 

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

 

Spotify Per Stream Rates Drop as Service Adds More Users…

 

USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue

Pandora’s New Deal: Different Pay, Different Play | NPR

The new payola?

Performers get paid a small royalty each time one of their songs is played on Internet radio, at a rate set by a Royalty Court at the Library of Congress. But Internet radio and labels can strike individual deals, as Pandora did with Merlin. The Internet service will recommend Merlin artists over those not affiliated with the consortium in exchange for paying Merlin’s musicians a lower royalty rate.

Merlin artists get more spins, and Pandora winds up paying less in royalties than it would if were giving those same spins to non-Merlin artists. Plus, consortium labels will get to suggest favorite tracks.

READ OR LISTEN TO THE FULL STORY AT NPR:
http://www.npr.org/2014/11/26/366339553/pandoras-new-deal-different-pay-different-play

Merlin on YouTube music payouts: ‘Their figures are by far the worst’ | Music Ally

“The ironic thing is that the service that pays the least is the service that’s the most well funded and run by the biggest company in the world: their figures are by far the worst, whether you measure them on a per-stream basis or a per-user basis. I tend to get myself in trouble when I talk about that company…”

Hence his desire not to name them directly, but quote instead from an interview with Billy Bragg conducted by Music Ally earlier this year. “If we’re pissed off at Spotify, we should be marching to YouTube central with flaming pitchforks,” said Bragg – Caldas read this quote out before delivering his own pointed follow-up. “I can’t say Billy’s right, but I can say that he’s not wrong,” said Caldas.

READ THE FULL STORY HERE AT MUSIC ALLY:
http://musically.com/2014/04/30/merlin-youtube-music-payouts-charles-caldas/

RELATED:

What YouTube Really Pays… Makes Spotify Look Good!

Streaming Price Index : Now with YouTube pay rates!

Merlin on YouTube music payouts: “Their figures are by far the worst” | Music Ally

No surprise to us…

“The ironic thing is that the service that pays the least is the service that’s the most well funded and run by the biggest company in the world: their figures are by far the worst, whether you measure them on a per-stream basis or a per-user basis. I tend to get myself in trouble when I talk about that company…”

Hence his desire not to name them directly, but quote instead from an interview with Billy Bragg conducted by Music Ally earlier this year. “If we’re pissed off at Spotify, we should be marching to YouTube central with flaming pitchforks,” said Bragg – Caldas read this quote out before delivering his own pointed follow-up. “I can’t say Billy’s right, but I can say that he’s not wrong,” said Caldas.

READ THE FULL STORY AT MUSIC ALLY:
http://musically.com/2014/04/30/merlin-youtube-music-payouts-charles-caldas/

RELATED:

What YouTube Really Pays… Makes Spotify Look Good!

Artist Revenue Streams : Streaming Marketshare By Volume and Revenue (includes YouTube and Spotify)

Streaming Price Index : Now with YouTube pay rates!