The debate is on-going. Is music streaming a good business model and does it work well for artists? Many classic, high profile bands/artists have chosen not to make their catalogue available through such streaming sites (Spotify, Deezer, Rdio etc) however Pink Floyd’s Nick Mason praises music streaming services by claiming “Spotify was a success for us.”
Back in June 2013 to raise awareness of Floyd’s arrival to Spotify the track ‘Wish You Were Here’ was made available and on the proposition that the track gets a million plays the whole of the Floyd catalogue would become available on the service; needless to say this only took 4 days and the full catalogue was made available on Spotify for users pleasure.
Mason talks about how since the Floyd catalogue had been made available on streaming services the band had benefited and has been converted to the ways of streaming.
“A lot of people have been streaming our music, and importantly also a lot of people who weren’t yet familiar with our music. Perhaps I would say something different if we were having this discussion a year and a half ago, but now it’s becoming clear that streaming is not another form of piracy, and you can argue that more music is being listened to now than…in the past.”
Pink Floyd were long time holdouts from streaming services but even they have been converted which makes me wonder will we see the likes of AC/DC on Spotify; I can hope!
Spotify however has recently received criticism from CEO of Ministry of Sound, Lohan Presencer (who recently sued Spotify over user generated compilation playlists – Read here) on the sustainability of Spotify’s business model. He brings to our attention the following that Spotify has spent $206 million since its launch in 2008, and is reportedly seeking a new round of funding that would value its business at $5.3 billion.
“To put that in perspective, that's nearly double what Universal Music Group paid for EMI, and nearly as much as Microsoft paid for Nokia,”
Presencer acknowledges that Spotify has six million paying users which is a respectable number however further adds his doubts.
“But does this customer base make it a long-term viable business? Given its license deals require it, like iTunes, to pay 70% of revenue to the music companies, and that it has to subsidise four times as many free customers, how long can it continue to borrow money from investors on the promise of a lucrative exit?”
This does highlight a threat to Spotify; can it continue to operate long term? Premium subscriber users are loving the service, myself being one of them, however if Spotify doesn’t make a profit soon and hold up its costs in a more effective way the service may be in danger of meeting its end. The service would need a lot more subscribers to generate better cash flow.
6 million premium subscribers may sound like a lot of however when compared to 300 million active users of iTunes it highlights that a company like Spotify is still in its infancy.
Bringing back to the point of Spotify benefiting Pink Floyd this is great to show that classic artists do benefit from the service however wouldn’t it be true to say that it’s obvious they would find success? To question really is how unsigned artists/small time artists can benefit from the streaming business model.
Something I’d like to address however is whether it really is Spotify’s fault how much income small time artists receive from streaming services? When it comes down to it the same would apply to downloads. If your band isn’t very well known is it iTunes fault that you have only reached 100 downloads of your new single on iTunes? No it isn’t. That is down to the band and the marketing put around the single and generally how good the band’s music is. So is it fair to say that it’s Spotify’s fault that their 1000 track plays on their new single only brought them a few pounds?
It should be remembered that Spotify is a platform to put your music on, and only one platform (there are many other streaming/download platforms), It isn’t Spotify’s responsibility to market that single so that Band X receives a decent amount of income.
Also, it is usually down to the record label (if the artist is signed) as to how much of a percentage that artist should get from Spotify royalty payments; Spotify doesn’t determine that split. As suggested by Nick Mason a 50/50 split of revenues with labels and artists would be a fairer split which would improve relationships between the two parties.
This does suggest however that to really benefit from streaming services as a small time artist/band it may only be from a promotional angle to get new listeners/fans as opposed to making any real money from it. I agree this isn’t good or ideal however isn’t exposure what these artists/bands need? To get big they need the promotion and in a culture of P2P file-sharing surely this isn’t as bad an option? The increased exposure may boost their physical sales, live gig tickets, merchandise sales and put them in the public eye.
The debate is one that needs a lot of thought and we would like to know your views on streaming services; especially if you are a musician yourself with tracks on the service.
Does it benefit you and how?
It is clear that for the consumer streaming services are brilliant and I myself love the constant access to millions of tracks on demand, however is it of the same benefit to artists? It is clear that streaming services are gaining popularity with consumers and this can be seen as either a great outcome or a worrying one for small time artists.
We want to know your view and any suggestions. Does Spotify have a sustainable business model and how can Spotify better benefit/be used by artists whilst keeping itself afloat as a business? As much as artists feel they aren’t getting enough return from the site it must be remembered that Spotify aren’t making profit either.
Leave your thoughts in the comments below and share/tweet about and join the discussion!