Spotify CEO: ‘Your Album Is Getting Traded on BitTorrent, Right Now…’

Against a potentially bigger wave of windowing and pullouts by major artists, Spotify’s CEO is now taking the counter-offensive.  In an interview published by grammy.com, Daniel Ek addressed Spotify pullouts head-on, partly based on the argument that your content is already being file-swapped. Here’s the excerpt, the full interview is here.

“I’d also like to address people who think they’ll gain sales by not being on Spotify…

danielek

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

“Album unit sales [were] up in the US in 2011, the year Spotify launched, for the first time since 2004. More than a dozen albums which debuted at number one have been available on Spotify at launch.

“Spotify users are the exact same people [who] used to listen to music every day on YouTube, whose entire music collection was pulled off BitTorrent sites.

“By offering them a compelling music service that allows them to discover hundreds of new artists, not just their favorites pulled from YouTube or [pirated], we’re seeing millions move back to listening to music legally after years of being left out in the cold.

“They’re helping pay a ton of money back to the industry. You’re talking 10 million active users, 2.5 million subscribers — most of them paying $120 a year, which is double the amount of your average iTunes user.

“Do you really want to hold back your album from people who are finally paying for music again?”

“If you think that by doing so you’re getting them to buy your album on a CD, or as an album download, again, there’s absolutely no evidence to back that theory up.

“Your album’s getting shared en masse over BitTorrent, over YouTube. It’s there, right now — but you decide that it’s the paying, loyal music fans that should lose out. It makes no sense.”

41 Responses

    • elbandito
      elbandito

      is that true? I had no idea… makes me wonder how he reconciles the fact that he ran uTorrent – one of the most popular p2p programs – with his current company, which is actively trying to put down p2p sharing.
      ultimately, I feel that sharing is more helpful than it is a hinderance. those that stand to make millions are the most vocal complainers; those that actually make the art are usually not the ones getting paid and that makes me not give even the slightest damn about this so-called pirating problem.

      Reply
    • Steve
      Steve

      It all makes complete sense.. Its about time the music industry woke up to the fact that music is everyone and all music can be found to download for free somewhere on the web.

      Reply
    • jdestro2
      jdestro2

      If Spotify actually compensated artists fairly; they likely wouldn’t have pulled their content. I don’t believe that the only choice is Spotify or illegal downloads. From what I’ve seen on this site in the past; Spotify is passing along next to nothing to the artists that they play. If artists actually saw a decent return, and/or could trace sales coming directly from Spotify customers; maybe they wouldn’t have pulled their tracks. As a consumer; I would very much prefer to be able to continue to access all music in which I’m interested via legal streaming services such as Spotify. But, as an artist; I can also see the business rationale for keeping some tracks exclusive.

      Reply
  1. @madktc
    @madktc

    There is not one shread of evidence that this is a true statement: “Spotify users are the exact same people [who] used to listen to music every day on YouTube, whose entire music collection was pulled off BitTorrent sites.”
    Its far to difficult to determine with-all-certainty that Spotify is cannibilizing iTunes or bit-torrents. The data is in its infancy.

    Reply
  2. Darryl Reeves
    Darryl Reeves

    The only thing I don’t like about Spotify is it’s lack of transparency. They need to work that out. That’s important. After seeing the news about Vevo not paying indies, these kind of practices will bring forth a growing amount of contempt.
    To Spotify: Be fair, don’t be greedy.
    Other than that, it makes total sense what he’s saying. Streaming is an issue of scale, and once streaming becomes the dominant means of consumption (like the cd did) the money will come.

    Reply
    • David Allan
      David Allan

      How do you think Spotify are being greedy? They have paid millions to the labels (upwards of 60% of all revenue gained from subscription is paid to the labels).

      If you think artists aren’t getting paid their due share, then it’s the labels being greedy, not Spotify.

      Spotify (and other streaming services) have a responsibility to pay the labels, but it’s the labels responsibility to pay their aritsts.

      Reply
      • Darryl Reeves
        Darryl Reeves

        Dude, I’m not taling about label/artist breakdown percentage. I’m talking about Spotify payinf it’s bills FAIRLY to the parties that are owed. Other than that, I’m game! Did you read my post fully?

        Reply
  3. Yves Villeneuve
    Yves Villeneuve

    I would like to address the fact that some Spotify and other subscription service users who don’t get what they will resort to stealing.

    Note to music listeners: No one ever said Spotify and other music services like Rhapsody and iTunes were a one-stop shopping place for music. Can’t find the music in your favourite store, find another store which carries the product.

    Music subscription services undervalue the work of artists for the benefit of executives and investors.

    Don’t let hackers and thieves control/dictate the Internet and legal commerce. Hackers and thieves turn to intimidation and misinformation in order to censor opponents.

    Daniel Ek, stop giving your subscribers the go ahead to steal if the music is not on your service.

    Reply
  4. Yves Villeneuve
    Yves Villeneuve

    It is possibly true that the average Spotify user spends more than the average iTunes user, which is why Spotify could never scale to the dominant position in the music marketplace.
    Most paying consumers don’t spend $10 a month on music which is why they spend at iTunes.
    Unfortunately, paying Spotify users would normally spend more than $10 per month but choose to sign up to a heavily discounted service like Spotify. They are joining Spotify because they are saving lots of money from not spending on music.

    Reply
    • Visitor
      Visitor

      They may spend less than $10 a month because there are very few albums they wish to fork over for. But the oppertunity to have virtually everything for $10 is a pretty good deal.
      It’s really a question of what the consumer gets for that $10 a month.

      Reply
      • Yves Villeneuve
        Yves Villeneuve

        Unfortunately for supporters of subscriptions services, your explanation is illogical.

        iTunes customers on average aren’t willing to fork over $10 per month on music they would never fork over money.

        Put simply, they only buy what appeals to them, which amounts to less than $5-$10 per month, while the rest of the Spotify library is crap to these customers.

        Unlimited access to crap is not an incentive to spend $10 per month for iTunes customers.

        Reply
    • Yves Villeneuve
      Yves Villeneuve

      I would like to know the number of songs in playlists per Spotify customer.
      Are they getting their money’s worth? …and over the long term will each customer be adding 10 songs per month to their playlists?
      Paul Resnikoff, if you are reading, inquiring minds would like know reliable stats to this question.

      Reply
      • Mikey Likes It
        Mikey Likes It

        Yves,
        Why don’t you get a free account and poke around for yourself?
        Right now there are 3 million users that don’t think the catalog is “crap”.
        You can see hundreds of playlists pop up when you search any song or artist. Some users have hundreds, others have a few. It’s the way each user customizes it to suit their needs.
        In the end the number of songs in playlists is irrelevant if they’re happy with the service. This isn’t about X amount of songs= Y amount of money. It’s about enjoying the way music is delivered and experienced.
        If someone pays $10 a month for the service, streams 5 albums constantly (but of course has access to tens of thousands and is ok with that) everything else doesn’t matter.
        As much as you seem to despise the service, it might be in your best interest to play around with it. even Domino’s Pizza orders the competition’s cheesy bread to compare it to theirs….
        I saw that on the TV.

        Reply
        • Yves Villeneuve
          Yves Villeneuve

          Consumers should always be mindful if they are getting their money’s worth instead of just being caught up in this delusional hype. iTunes customers as a whole understand this picture 🙂
          I understand your unwillingness in allowing Spotify to share the metric I ask for because we both know it will make a lot of people wiser, music industry and consumers included.
          I think Paul Resnikoff is an avid Spotify user so I don’t believe he will seek the answer to my question, just saying.

          Reply
          • Mikey Likes It
            Mikey Likes It

            Yves,
            I don’t doubt that Spotify would potentially release this info…with that I don’t know who you think “I” am or have the power to even release such info.
            I like spotify. So do many other people, we’re still only 1% of the entire music consuming population. Some of us use it exclusively, some in conjunction with puchases of mp3s, or physical, some along with pirated or shared material.
            At the moment I don’t hear people screaming from the rooftops for the metric you’re requesting…In my opinion it’s neither really here nor there. I think the tallest order for them is to cough up more info and be more transparent on the overall structure of how they work….for artists and for consumers so they can make educated decisions on how to release, or consume music through the service.
            As of right now, it appears that 3 million people are getting their money’s worth…and maybe more than their money’s worth. In time we’ll see if that sentiment is shared with the majority of the the music consuming public, or if it goes away.
            This is really a matter of taste, opinion and different strokes for different folks.
            I don’t agree with everything Ek says, but the one thing I do agree with is that comparing Spotify to something like Itunes is literally comparing Apples to Oranges.
            The problem is that he doesn’t go into exactly how and why they’re different (he skims the concept), and specifically how in the end one could be better all around.

          • Yves Villeneuve
            Yves Villeneuve

            Mikey, by Spotify releasing the info I request, number of songs in playlists per customer, is the most important piece of information in forming an opinion about Spotify and other subscription services, for both the artist and consumer. Money is the most important criteria when making a business or consumer decision, for most decision makers on this planet. I am asking Paul Resnikoff to seek the information from Spotify.

            I can’t possibly imagine any single piece of information from Spotify more important for both the artists and consumers. You can compare iTunes and Spotify, and this is how it can be done:

            As a consumer you may be adding 20 songs per month to your playlists therefore are getting more than your money’s worth but at a potententially great loss/cost to the music industry. Instead of spending $20 at iTunes you are spending $10 at Spotify: you gain while the music industry loses.

            If you are only adding 5 songs per month to your playlists than you as the consumer are being financially screwed. Instead of spending $5 at iTunes you are spending $10 at Spotify: you lose while the music industry gains.

            You can create playlists and rate songs in the iTunes app, free of charge. You can discover songs for instance by browsing the iTunes index categorized by genre and listed by band name. There are other good ways to discover and share music info on iTunes, such as Ping and other peoples’ playlists for instance.

          • Mikey Likes It
            Mikey Likes It

            Yves,
            First of all. Some people use Spotify without making any playlists. Some use the Apps strictly, some make 100 playlists and listen to 2, some cherry pick off of their friends timelines in facebook. Right now there are 3 million paid users and roughly 10 million active users overall, the user profiles are too disparate to make any real statement.
            Everyone is different, you can’t use playlists as a metric create the data you’re looking for.
            Spotify pays back into the industry in a completely different way. It can’t be compared, mostly because the way value is created by way of the content delivery is completely different.
            Itunes is a fixed system, content costs a certain amount. You pay for it. You own it.
            With Spotify, the basic value of the content is based on the net of the company’s revenue within a 90 day cycle via ad, subscription revenues. When that’s calculated it’s multiplied then by numbers of streams you had.
            The consumer pays for access to the content. The artist or label gets paid for the use of the rights, via 2 royalties.
            This is a dynamic system. Both the value, and the potential for the content to be consumed, how much and how often.
            By nature, the two are nothing alike (except for that they distribute music), and potentially neither will the consumer who chooses to use one over the other (though I have a feeling both platforms/formats will exist concurrently for many years to come the same way all the others have coexisted).
            If an artist or label is happy distributing through the service, and the consumer is happy using it, what’s wrong with that?
            I understand it doesnt’ behoove you as a recording artist that doesn’t seek radio airplay, other types of merchandise sales, or live performance revenues, but in the end it’s everyone elses right and decision to figure out if they’re being financially screwed or not.

          • Yves Villeneuve
            Yves Villeneuve

            I only agree with your last two paragraphs, which is exactly what I have been saying.

            Nonetheless, the download system is a much more fair, efficient and transparent marketplace for both the music industry and consumers.

            The notion every Spotify subscriber is espousing is, having the ability to create playlists is similar to ownership of songs. This is why Spotify and iTunes can be compared side by side. Do you not place the same emotional attachement to the songs in your playlists similar to the songs you would have purchased through iTunes? For comparison purposes Spotify or its users have openly stated, you do,…

            … but in reality ownership places a higher value on music than renting it. You will never see me devalue my music by allowing others to rent it.

          • Patriq
            Patriq

            Yves,

            I don’t get your ranting about songs in a playlists. I think most of the users never use playlists. They are just a hassle and does not work very well in Spotify if you have more than 20-30 songs in a playlist.

            I’ve been using Spotify on-off for the last 2 years. I have some playlists, e.g. one where I drop music I found interesting, but will listen to later. A matter of fact is that I almost never use my playlists for anything at all, meaning that your idea of using number of songs in a playlist as some kind of a basis for calculating comparable compensation for two fundamentally different services (iTunes and Spotify) are fundamentally not valid. I just look for the album I want to listen to and go from there. Or just wander around to see what pops up on the screen.

            Also, now when Spotify is highly integrated into Facebook, I would imagine the people pick recommendations from their friends, and listens to those instead.

            Yves, if you want something to do your calculations on, it would be the number of listenings per user in a certain period (both free and premium), but that’s a figure Spotify probably never will publish anyway.
            I would also like to see some more transparency on behalf of Spotify, but actually if you as an artist is not satisfied with the compensation, the aggregator or the label are the ones to blame, since they made the apparently “bad” deals from an artist perspective in the first place.

    • Yves Villeneuve
      Yves Villeneuve

      The record labels (and maybe some of their executives) who are sizable shareholders in Spotify as well as Spotify itself are spinning your head so fast you don’t even know it is spinning.

      Reply
      • KC
        KC

        @Yves. Almost nothing you’re arguing makes any logical sense if you have a shred of understanding of these two entirely different business models & products. Spotify is a service, iTunes is a retailer. You’re missing a hugely critical issue that you have to consider when evaluating these services, which @Mikey has done a great job of explaining several times over: the value propositions these two options offer consumers are completely different. You’re also ignoring the fact that iTunes is a mature business model, while Spotify and its peers (Rdio being my personal favorite) are operating a business model that is in its infancy–or, at the very least, is barely out of the gate along its adoption curve (esentially rendering any attempted revenue comparisons meaningless). Your claim that playlist data is “the most important piece of information in forming an opinion about Spotify”–and your mistaken assumption that the amount of songs a user adds to a playlist is a remotely accurate barometer of their use of the service or the monetary value of their patronage–demonstrates how fundamentally little you understand about the service, its business, and how consumers interact with it. Re-read @Mikey’s comments. They’re 100% correct.
        I’d also like to revisit @Visitor’s point and your response that “Unfortunately for supporters of subscriptions services, your explanation is illogical.” Unfortunately for you, the point is actually quite logical (but you seem to have missed it). What they’re trying to tell you is that consumers don’t value $10 at iTunes the way they value $10 at Spotify. The up-front cost of a product or service is not the only way to measure its value to consumers. And the worth of an indivudal’s purchase to the firm is also measured by far more than the face transactional value. Even worse, your assumption that Spotify users are the ones to spend more than $120/year on iTunes is just as egregiously unfounded as Ek’s assumption that Spotify users would otherwise be pirating music. There is no evidence whatsoever available to support or refute that statement.

        There are many legitimate concerns about streaming services and I have several, transparency being chief among them. I don’t even use Spotify myself, and I certainly think that with more data, we’ll be better prepared to assess these important questions. However, your stance epitomizes what’s WRONG with our industry and what hinders innovation: misinformation, blatant ignorance of facts, and very little understanding of real consumer bahavior. We have to be willing to experiment, take risks, and give consumers choice if we’re ever going to find sustainable growth as an industry moving forward. Being closed-minded to new models without even bothering to try to actually understand them is not going to get any of us anywhere.

        Reply
  5. Visitor
    Visitor

    “There’s not a shred of data to suggest that. In fact, all the information available points to streaming services helping to drive sales.”
    Where is this “available information”? Can you prove that it drives sales?

    – Versus

    Reply
    • gaetano
      gaetano

      This is all speculated, it’s not possible to create any type of metric to prove this.
      Thing is, the outcomes are speculated on both sides of the fence.
      Then again, any stat can be created and/or taken out of context.
      The IFPI and RIAA exist because a very specific sect of the industry exist and supports them, in the end they are all symbiotic.
      In the end it’s up to the artist and label to do what they want. It’s still their decision regardless of what Ek says or anyone else for that matter.
      One thing to consider though, Streaming is here to stay.

      Reply
    • Unit12
      Unit12

      That’s a good question and begs the point that Spotify does not link in any way to download the releases. If supporting artist sales was a goal of Spotify, they would start with simple links to download.

      Reply
      • Patriq
        Patriq

        Doesn’t Spotify offer the feature to buy the music as MP3s in the US? This has been available almost since day 1 in Europe, although I’m not sure how many would actually buy the MP3s if they are already paying for the premium service with offline capabilities on your computer and mobile.

        Reply
  6. Visitor
    Visitor

    So you have the choice between having your work stolen and having your work scammed at a ridiculously low pay-out rate, especially for indie labels?
    Sorry, this is fallacious thinking: a false dichotomy. There are other possibilities, like getting paid a fair rate for one’s music work.

    – Versus

    Reply
  7. B
    B

    Paul didn’t Digital Music News just report 3 million Paid subscribers? Where did the other 500k go?

    Reply
  8. Mafia
    Mafia

    “I really like your restaurant, the food is fantastic, the service is excellent. It would be a pitty if something bad happened one night. Say, a fire that burned it to the ground. You know how many restaurants are destroyed evey year? Very sad. But, don’t worry. I can provide security for you. It will only cost 90% of what you make every month. Hey, you don’t even have to go to the bank. My people will come here once in a while and collect. Nice doing business with you, my greetings to your wife and children.”

    Reply
  9. Cliff Baldwin
    Cliff Baldwin

    News flash, your MP3s are being sold on Amazon.com and your concert tickets are being sold on Ticketmaster while Spotify picks your pockets and your music is being pirated. May as well make some money by selling your music at a profit instead of making Spotify an acquisition target that will make its founders rich. How many indie artists even know what Spotify pays? I bet you don’t even know.

    Reply
  10. Munk Duane
    Munk Duane

    Stop complaining Daniel Ek and actually add releases from the long tail of the industry with faster than a 4 months turn-around!

    Reply
    • David G
      David G

      In my experience Spotify is quite efficient at releasing our artists. No song shipped by us ever had to wait 4 months. its more like a week or so. QUite a reasonable time frame i think.

      Reply
  11. @MusicBizGuy
    @MusicBizGuy

    All this disucssion around streaming services like Spotify and what they pay or don’t pay to artists is really a pointless waste of time and energy. Regardless of what they pay out, streaming services expose artists by playing their music. The more they play an artist’s music, the more likely those artists will benefit from multiple revenue streams the least of which will probably be download music sales or publishing income. If you are a major legacy artist with a huge catalogue or a pop or rhythmic artist with enormous airplay at radio then it’s possible that revenues made by a streaming services should be paid to some entity on your behalf or to you directly if you own the rights to your own songs. Howevwe, most likely monies made from playing this music will be paid to a record label which in rare circumstances will never pay those major artists without an expensive audit forcing them to. So if you are anybody else but these major artists you are vastly better off not worrying about the pittance a streaming service should pay you but how you can generate more gigs and merchandise sales from the exposure they are already giving you. If anybody or thing needs to be transparent, it’s the record lables who never have been and never will be until a major assault is mounted upon them by artists seeking the whereabouts of their money.

    Reply
  12. rodney
    rodney

    Everything Daniel said is true. However, he left out the idea that maybe the artist has chosen to opt out of their service not because of how it affects their album sails, but because they believe their material is worth more than Spotify’s proposed rate. Those two ideas are very separate, no matter how much Daniel tries infuse the two conversations together. Artists most definitely have the right to say no to Spotify, even at the risk of having their material pirated and/or pissing off their fans. That is free market, and it works.

    Reply

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