Thom says its time to pay: Spotify in the spotlight as acts complain of low royalty rates

August 2013

Internet, artistes, record labels


One of the most important posts I have ever read about how the music industry might function in the future has been published on the CMU Daily website – I say ‘one’ – its actually two posts looking at the Spotify business model – and why its good for tech start ups and their record label partners – and very bad indeed for artists who are currently receiving a (usually) tiny share of revenues from their labels for digital uses – and in the case of two of the three majors, Sony and Universal, the very same labels who co-own Spotify

Now Radiohead frontman Thom Yorke and producer Nigel Godrich have taken to the net to formally express displeasure in the all-you-can-eat streaming business model. To prove their point they announced that their respective solo albums, and the long-player from their collaborative venture Atoms For Peace, had all been removed from Europe’s highest profile streaming service. Announcing what he dubbed as a “small meaningless rebellion”, producer Godrich said via a string of tweets: “We’re off of Spotify. Can’t do that no more man. Someone gotta say something. It’s bad for new music. The reason is that new artists get paid fuck all with this model. It’s an equation that just doesn’t work” with Godrich saying “The music industry is being taken over by the back door, and if we don’t try and make it fair for new music producers and artists, then the art will suffer. Make no mistake. These are all the same old industry bods trying to get a stranglehold on the delivery system. The numbers don’t even add up for Spotify yet. But it’s not about that. It’s about establishing the model which will be extremely valuable, meanwhile small labels and new artists can’t even keep their lights on. It’s just not right”.

In related news, Will Page, the former PRS for Music economist and now Spotify’s Director of Economics, has authored a new research paper ‘Adventures In The Netherlands’ looking at the streaming service’s three year operation in the Dutch market, the accompanying fall in piracy and growth in recorded music income in the region in that period, and whether there are links between these facts. Although stressing that you can’t always be certain about cause and effect, Page’s report looks at sales and file-sharing stats for the Dutch market (supplied by GfK and Musicmetric) around four major album releases, two of which put their music on Spotify alongside download release, two of which held their content back from the streaming services for a time. Page says that there is no indication that the two artists who had concurrent download and streaming releases – records from One Direction and Robbie Williams – suffered in terms of record sales because of their presence on streaming services. Moreover, the ‘sales to torrent’ ratio (so how many copies were sold versus how many were illegally shared) was better for those two albums, compared to Rihanna and Taylor Swift records that were kept off Spotify and other streaming services for a time.

In contrast, the Music Managers Forum, which is chaired by Radiohead manager Brian Message, has issued a statement in support of the streaming service saying “The Music Managers Forum embraces streaming as a technological development that adds to the ways that consumers can pay to access music. Any music creation is now potentially ubiquitous, for free, as soon as it is made available digitally. Streaming is in its infancy but growing fast and providing meaningful rewards for many. Income from radio, compact discs, downloads and even resurgent cassettes grows as the fruits of artists labour are discovered and become more popular. That popularity is a measure of the success of the artist fan relationship which is at the core of the modern music ecosystem” adding “A new music business is being built that encompasses publishers, labels, technology, financiers, producers etc, but that has the artist and fan firmly at the centre. Everyone, including artists and fans, in the new business needs to adapt to the new world” and finally, the statement concludes: “Streaming is not a download. Nor is it radio. It is streaming. It’s different and a part of the future”.

And the pendulum swings: this was followed by a statement from the Musicians Union, the 30,000 strong association, demanding that the music streaming service draw up a new minimum pay deal for artists. The MU said it was pushing for a collective pay agreement modelled on the royalties paid by BBC and commercial radio stations. Now there is some confusion over what Spotify actually pay – one article said that Spotify pays artists “as little” as 0.4p per stream, which means that a song that had a million plays would earn its performer just £4,000 according to the MU. Another article had the rate at 0.08p per stream in the UK and Scandinavia.  Other rates quoted online include $.001 per stream, $.004 per stream over the past three years and $.00029 per stream.

One artist, singer-songwriter Tom McRae, says the argument that Spotify would prove to be the salvation of the music industry – because it negates the threat from piracy and generates income – had failed. He said Spotify had “pulled the wool over fans’ eyes, letting them believe they’re supporting the artists by using a legal streaming service which pays out royalties to the bands” saying “Friends and family tell me with pride how they listen to my earlier albums on Spotify, in the knowledge that every time they listen I’m earning money. I haven’t got the heart to tell them that if they listened every hour of every day for the rest of their lives it wouldn’t add up to the price of a round of drinks.” Spotify says “We’ve already paid $500 million to rights holders and by the end of 2013 this will have reached $1 billion. Much of this money is being invested in nurturing new talent and producing great, new music”. The devil is in the detail though – the payments are made to ‘rights holders’ – and with Sony and in particular UMG now dominating the recorded music sector – a large proportion of those payments will be going to Spotify’s own shareholders who are in a very interesting (and possibly conflicting) position viz a vi their own artists – and appropriate royalty rates both from Spotify and to the acts. But with streaming now compromising 66% of Norway’s total recorded music market in H1 2013 according to Music Week editor Tim Ingham, and Scandinavia seeing a 17% growth in streaming year on year – digital royalty rates and the divisions between labels and artistes are going to be critical discussions in the months to come.

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