Spotify is “Part Of” but not “The” (Part 2)

“I’m a fan of [Spotify’s] model, I’m not just a fan of that company, although they’re all great guys, they’ve got great tech, great engineering, I mean the Facebook integration is amazing.  But I’m a fan of that model, and why am I a fan of that model?  Because that’s clearly what consumers – some consumers – want to do.  – Rob Wells, Universal Music Group’s head of digital business



I generally get new music from the bands I work with and if I need to add a new album or song from an artist I don’t work with I’ll just go buy it on iTunes.  I can put playlists on my iPhone and pretty soon I’ll be able to do a whole lot more with the 20,000 songs I have housed on my hard drive with iTunes Match right around the corner.

This works for me.

Lets get some facts straight about Spotify and the future of streaming in the music industry.

The first six months of Spotify are free.  Anything free is worth giving a shot, if even only for one day.  I encourage you to try it out.

How much do artists/labels make?

Long Answer:  You go on Spotify and listen to your favorite bands new album one time.  That album has 12 songs on it.  You just made that artist/label about .05 cents total.  Five cents total.

Short Answer: Not much.

Go on iTunes and buy your favorite bands new album one time.  That album has 12 songs on it.  You just made that artist/label about $10.

This does not take into consideration the costs of a middleman, a label, Apples 30% commission, etc. etc. etc. There are a lot more factors but the above examples give you an idea of what one full album of spins calculates too in the streaming vs. download business model.

Important Point: Spotify, like Deezer, MOG, Last.FM, RDIO, Earbits are giving you an alternative way to listen to, buy, share and consume your music.

.…an alternative way.   

I worked with an artist a few years ago that had 300,000 records sold.  Their label had calculated that without piracy they may of sold 900k+ albums, 200% more, which would’ve blow the band up.  I argued that those pirated albums raised the overall value of the band based upon the distribution deal they had setup and in the end might of been a key factor in the total albums figure. (this is an my personal opinion and an opinion shared by others in the music industry)

Listen, I’m not arguing that piracy should be legal and music should be given away for free.  The simple fact is that piracy is going nowhere.  T-shirts have been pirated, live shows are pirated, samples are pirated, etc. for a hundred plus years….  Even if the Blacklist Bill gets passed, someone will figure out a way to copy and distribute digital entertainment.  Piracy is here to stay.  Its inevitably permanent.

Side Note: Spotify claims they have reduced piracy and are converting more free customers to their premium offerings.  This is often referred to as the “freemium” model.  Give it for free and they will come back to pay, similar to drug dealing.  By the way, Spotify is only claiming that piracy has changed in Sweden, its way to early to calculate the effect on piracy and the U.S. market.

Artists need to build value outside of their digital products.  Have great merch, a physical only deluxe copy, a spectacular live show, other pieces of physical artwork, etc.  With the plethora of music being distributed every week, in the neighborhood of thousands of albums per week, you need to do whatever you can to stand out in a large domestic and international crowd of similarly talented people.

Proper Distribution is Key!

Artists make the majority of their money from digital sales.  The numbers are staggering, in the neighborhood of 75%, give or take five-ish points.  Are you getting proper distribution?  Is your music available in every popular music market?  ie.  The U.S., Canada, United Kingdom, Germany, France and Japan?

Each artist needs to take in account what works for them.  Coldplay recently decided that Spotify was not a part of there launch plans for Mylo Xyloto.  Adele’ “21” is also missing from Spotify.

The bottom line is that people want an easy way to consume music and for a cheaper price then they’ve ever paid for before.  Spotify offers a solution to consume a large library of music (25m songs last I saw) for a relatively small monthly fee.

Our attention is fragmented by many entertainment options.  If Spotify can deliver new fans and make each artist a little bit more money then this all can’t be bad…right?

This is why Spotify is “Part Of” but not “The” solution.


special thanks to sources: Digital Music News, Ian Rogers of TopSpin and Dotted Music.  

ktcmgmt.com, killingthecabinet.com