Spotify Says They’re Gonna Be So Big, Artists Won’t Even Have to Worry About Rent…

That’s according to the bigger-than-life vision of Spotify CEO Daniel Ek, who deftly parlayed questions about measley artist compensation into much larger possibilities during a recent SXSW chit-chat.  All of which informed a subtext that sounded like this: if you’re focused on pennies today, you’re missing out on all those dollars tomorrow.

During the ‘fireside chat,’ held at the Long Center theater in downtown Austin, Ek outlined a service that will ultimately have a billion users and plenty of ‘decent wages‘ to go around.  “Artists shouldn’t be asking ‘How much am I being paid per stream,’ but instead ‘How many times could my song be played?'”

“I want to get back to the time when artists can create a piece of music for five years without worrying about how to pay rent,” Ek said.

So again, if you’re focused on half-a-penny streams or non-existent pass-throughs from your label, you’re missing the point!  Just look at any successful Spotify artist, like, I don’t know… David Guetta: “David Guetta now has more than four million followers on Spotify,” Ek told the near-capacity crowd.  “So whenever he posts a song, it automatically goes out to those four million people who instantly get a notification on their phones.”

“This is a really huge marketing opportunity for artists.”

Yet marketing is now super-complicated according to Ek, despite costs that are careening towards zero.  “We don’t charge any artists to be on the Spotify platform,” Ek said.  “That means distribution basically costs zero.  Yet weirdly enough, marketing has now become tougher than it ever was before: you have to be on social media, YouTube, Spotify, you have to have all those things working really well for you.”

for_rent

So how can an artist become just like Guetta?  The question is whether Spotify can create an ecosystem large enough to support that level of aspiration, or if Ek’s envisioned ‘new radio‘ is just a way to spread the word.  During the talk, Ek revealed that Spotify now has 6 million paying subscribers and 24 million users, but this is a company still in the red and burning millions in investor cash.

And can streams really pay the rent?  Just ahead of the Ek talk, Nielsen presented research that suggested that artists could collectively ramp their revenues by more than $2.6 billion – if they were only selling the right things to the right fans (the so-called ‘Aficionados’).  Separately, companies like BandPage are trying to create just the platform for that sort of direct-fan ‘Experience,’ all with the idea of tapping the most willing buyers.

Which means, paying the rent could be a lot more complicated than we think in the future.

 

Paul Resnikoff, publisher, reporting from SXSW in Austin. Image by Brian Gautrea

45 Responses

  1. steveh
    steveh

    “Artists shouldn’t be asking ‘How much am I being paid per stream,’ but instead ‘How many times could my song be played?'”
    If this isn’t “fuzzy math” I don’t know what is!
    What is the matter with this guy?
    Surely, from a reality based perspective, if we are talking about “paying the rent” then any income computation is based on both pay per stream and number of streams played – one multiplied by the other.
    To suggest that it is a question of either/or is truly bizarre.
    What kind of wierd drugs is Ek on?
    Just to repeat:-
    Spotify income = number of streamed plays multiplied by rate per stream.
    What could be simpler than that?

    Reply
    • HansH
      HansH

      You are 100% right Steve. It is as easy as that.
      Chances that the rate per stream will rise above 1 cent per stream are close to zero, so it has to come from the number of plays.

      Reply
      • Visitor
        Visitor

        We’ve heard a decade of profits claiming how big the business is gonna be (once they make their money). How’s that working out so far?

        Reply
    • Osiris Munir Stones In The Col
      Osiris Munir Stones In The Col

      We here at base agree.
      The equation is simple as you say, the missing link is for Spotify to recognize that all artist, and other creative people, live somewhere between this world and another. They should put themselves in the place of an artist. Walk themselves through how an artist perceives life and the basic fundamentals of life while honing their craft. Their seems to be a lack of understanding between corporate businessmen and art. The two have always had a history of friction because one is based on gain and profit and the other on emitting raw, natural talent. How can one truly bottle talent that is inspired by something, of which we have yet to define.? Tell us how do we keep our talent from starving, from losing hope, from despair, the drugs, the alcohol, how do we manage to keep, money rolling consistently into their pockets and ours, the answer, by putting ourselves in their place and walking in their shoes. Spotify does that, they rule the 21st Century and rock the house on critical partnering, while living on a very small and exhausted planet.

      Reply
    • TUNE HUNTER
      TUNE HUNTER

      Daniel is not right. Billion guys will bring 10 billion in sales (9.99 will not fly in all countris) and that will make only 25% of music industry in 1999. With billion subscribers there will be zero music buyers.
      Good luck with this portable Napster

      Reply
    • Visitor
      Visitor

      It seems to be an picture of Floyd Mayweather taken from his Google+ page. I don’t see anything about the picture being public domain or commerical copying is otherwise permissible, so Paul must have gotten permission before using it.

      Reply
      • Visitor
        Visitor

        Paul deleted a similar comment in his newest article. Just a heads up, Paul doesn’t seem to like it when you attempt to find sources for his cute little images.
        Why are you deleting comments that are attempt to provide sources to the photos in your article Paul? I just want people to know where the images are coming from. Should I also notify the copyright holders and remind them about copyright law on photographs, and ask them if you got their permission?
        There is no excuse to not credit your sources. And in addition, for God’s sake ask for permission before you use other people’s work, no matter how “trivial” you think the copying is. This is a amusing photo that you choose to to enhance your article, someone had to put creative thought into it. It’s not worthless. It’s your obligation as a journalist, especially one working in the music industry where copyright is already a sensitive issue.

        Reply
  2. John
    John

    They don’t mention that spotify is an inefficient p2p that burns through bandwidth of others and all just to delete the files in the end.
    Hence, it’s the typical capitalist wet dream of dumping the real costs elsewhere. Anywhere as long as it’s not spotify.
    Streaming is a totally insane way to distribute on the internet. Everything on the internet is a download.
    The internet is not a broadcast medium. It is a download medium. The economics of broadcast are that cost per user goes down the more listen. With streaming it goes up per user.
    We even have stupid laws now that pretend the internet is a broadcast medium if only you call it ‘streaming’.
    To keep downloading the same thing continously but then deleting it is insanity economics.
    Why can’t people understand the way the internet works? It was never designed to handle broadcast efficiently and doesn’t. It will never do. The only thing it does well is downloads. To keep.

    Reply
      • Visitor
        Visitor

        Thanks. I despair at so many people trying to kludge broadcast economics into fitting the net when they are completely different technologies.
        Noone thinks about the real consequences like energy efficiency. To make streaming work on a mass scale you are simply creating extra energy demand for wasted repetitive work. All those data centres consume energy and water. Lots of it. Every user is more energy. More cost. It’s like everyone calling a call centre to get the same message. Nuts.
        Streaming only makes sense for low interest, low user applications. A video conference for minority interest is a great use of it. A sport broadcast or anything mainstream is not a sensible use of resources.

        Broadcast means real costs are fixed and divided by usage so for mainstream application makes sense. Radio does that. TV does that. That makes a popular show cheap.

        The net makes sense for minority use. That is where it excels: where broadcast economics would be too expensive and inefficient for minority use.
        Targeted advertising is what has driven all this nonsense. It turned the web from something quirky and great for minorities into a shambolic hyperbole of economic nonsense bubbles.

        Spotify is one of those bubbles. There are many others though sadly.

        Reply
        • Visitor
          Visitor

          There is hyper-efficient multicast/broadcast IP standards, they just never were widely implemented and don’t “work” on the Internet because they need support from all the routers in the middle.

          Reply
        • matthew king kaufman
          matthew king kaufman

          if you look at the history of technology and music. you’ll note change and the entertainment business have led to a sea of misunderstandings that are solved by time
          there was a strong reaction to the player piano (requiring legal action to create the mechanical license.)
          established bands boycotted radio, now a band won’t tour w/o some radio exposure.
          even when first introduced, the blank cassette tape faced a “blank tape levy” in european markets.
          the 33 rpm lp was a compilation of singles, and did not become the art statement for many years after the introduction of turntables.
          i don’t think these first attempts to ape broadcast are permanent. i’m grateful to these subscription services for making it easier for the general population to hear a lot of the music created in the past.
          the long view will see the medium will dictate the art that is created. streaming is the only way for the major copyright owners to substantiate their investments and their valuations.
          agreed streaming is wasteful and the #s will never work, but if viewed as a transition, it’s an interesting period in the brief history of recorded music.
          recorded music is a business and economics will dictate. so far the economics behind most of this tech revolution is money losing by venture capital.
          as long as this artificial economy continues the longer the dark ages of music will continue.

          Reply
    • jw
      jw

      Wow. I didn’t even realize there were people in the world who tought like this.
      1. The internet wasn’t designed with Twitter, mobile phones, youtube, netflix, spotify, mobile banking… the internet wasn’t designed with any of the modern internet in mind lol. Streaming versus downloading comes down to bandwidth availability. No significant web company has EVER come out of thinking like, “Everything on the internet is a download. It’s always been like that, it should always be like that.” lol The internet is evolving as bandwidth grows. I thought that was just understood by everyone.
      2. Streaming can be a great way to distribute content. Furthermore, you’re the first person I’ve ever heard call Spotify’s network inefficient lol. You’re literally saying the opposite of what everyone else says about Spotify’s network. Sure, if you exceed your cache (10gb by default), it deletes those files, but internet browsers work exactly the same way. Should Spotify fill up your entire hard drive if you keep listening to music? lol Either way, supposing a 3:30 song at 320kbps is about 6.5mb, you’d have to listen to about 1,500 songs before anything is deleted. Hardly inefficient. And that’s on a premium account with “high quality streaming” checked.
      3. Name me one consumer who has incurred Spotify’s streaming cost. I’ve never met one. I doubt you can name one. Consumers pay for a set amount of bandwidth per month, which hardly ANYONE uses up. You pretty much have to be violating your ISP’s terms of services to go over your bandwidth allotment. Are the costs REALLY being dumped when ISPs are just incurring bandwidth that the consumer is paying for anyways? A month of Spotify usage amounts to roughly one or two Netflix videos. It’s not a big deal. You’re basically arguing that users and apps shouldn’t be using the bandwidth that users pay for. Why not? What’s the problem here? Should Netflix go away, too? Are retina screens inefficient? Should the entire internet be text and black & white gifs? Should Youtube go away?
      You’re just wrong on all accounts. Spotify’s network is easily the most responsive and reliable of any streaming service, and far more convenient than any download service. I don’t know if you’ve got some internet connection from 2002 or what, but the issues you’re raising just aren’t issues. lol. Like I can’t figure out what your motives would even be to make this post.
      This is the most anti-technology coment I’ve ever seen on DMN.

      Reply
      • Visitor
        Visitor

        Just check your firewall and network analysis while spotify is running. You’ll see what it is doing and how much real resources it is using (that are not being paid by spotify).

        I have noticed people complaining about bandwidth on mobiles especially where they are often low. Hitting caps, trying to work out why. Spotify was often the culprit. Noone noticed when on desktops at home of course.

        Reply
      • Visitor
        Visitor

        I also love the way you claim I am anti technology.

        I have a long background in software architecture and technical deisng. Yes, I can design systems that make no economic sense for people with more money than sense riding the hyperbole.
        I can also design a system that does make sense. Less money available for that though these days. Everything turned to shit when targeted advertising fooled people into thinking they had a real economy.
        BTW I designed some very big well known systems.

        Reply
        • jw
          jw

          The way I understand it, Spotify IS essentially just downloading the data. It’s not deleting anything until you hit the cache cap. The majority of Spotify plays come from the local cache. When you are uploading, it’s generally because someone else is listening to the song for the first time, thereafter the song is played from their cache.
          Spotify isn’t deleting downloaded data from your hard drive in order to download it again. And the mobile app doesn’t utilize the p2p network. And streamed data is downloaded to your phone, and played from your cache, until you reach the cache cap, at which point it’s downloaded again from the Spotify servers. There are no inefficiency problems related to the mobile app, only self-control issues.
          Sure, on a shared network, multiple computers connected to peer-to-peer networks is going to cause issues. It doesn’t scale in that way. Their web player, though, solves this problem (play.spotify.com), & I think that Spotify intends for the web player to be used in those situations. If a company is supplying a network for it’s employees, I do see how the connections would be a problem. But files being deleted when a cache is maxed out is not a problem.
          And that’s not where most Spotify listening happens, anyhow. It mostly happens on consumer internet plans. And to that point, there’s nothing wrong with consumers or companies USING the bandwidth that is already paid for. There is no innocent party incurring big bad Spotify’s costs in this scenario.
          What you seem to be arguing for is a cacheless system that is downloading strictly from Spotify servers, & that sort of system is just plain not going to offer the response times that the Spotify network currently enjoys, & the response time is a MUCH bigger issue than it seems. And it removes users’ ability to control how much data is downloaded to their computer. And that’s a big deal.
          Peer-to-peer can be a little messy, sure, but well within the capabilities of the average consumer internet package. And I think the response time they enjoy thanks to peer-to-peer plays a huge part in their success.
          And there are PLENTY of folks in technology who are anti-technology. However, I do understand where you’re coming from. I just think that your statements are incredibly overblown, & are a bit regressive in nature.

          Reply
          • Visitor
            Visitor

            It doesn’t matter who’s p2p you are using, your own proprietry software or other, it is an energy inefficient way of doing things unless you are going to keep it.
            I still don’t understand how it makes economic sense to do things this way for a mass audience when broadcast technology is just more efficient for anything that is popular. They are the inverse of each other economically.
            The internet could have been designed as a broadcast system but it wasn’t. Now it is held up by moore’s law and duct tape. Throwing more computing power and energy at the problem.
            That is not a profitable future in terms of economics even if you can technically bodge it to look similar.

          • Bruce
            Bruce

            Great debate and discussion here..
            “broadcast technology is just more efficient for anything that is popular”
            Define popular? It seems to me that this is where the debate gets settled.

          • Visitor
            Visitor

            Popular is the crossover point of the completely opposing economics: Where one become more efficient than the other. Think of two cost lines one decending for broadcast capable tech, the other ascending for internet distribution. Cost is the real cost of the total resources used, not how little you can get away with by offsetting real costs onto others. Otherwise you don’t have a workable digital economy, you have a vulture economy.
            You can raise the economic efficiency and where that crossover happens with internet distribution by having a higher price point. So renting a movie on netflix is quite a high price point.
            Penny per stream doesn’t make much sense in the long term. The more costs eaten up by an inefficient infrastructure itself is less money to the creators in the long run.

          • jw
            jw

            In an ideal world a more efficient internet lowers the cost that consumers & businesses pay for internet access. Unless this lower price point leads to more subscriptions or better ad rates, I don’t see how that affects payout to creators, given that Spotify is offsetting costs as a byproduct of the p2p system.
            Streaming is a reality that consumers are willing to pay for, efficiency be damned, & ISPs are willing to provide it. I think that’s what it ultimately boils down to.

          • jw
            jw

            In a perfect world, I agree with you 100%. In hindsight, the internet could’ve been designed differently. But that’s asking a bit much, don’t you think? For all of this to have been foreseen? Or for the internet to be rebuilt? You’re basically saying “the internet isn’t built well enough for this to work!” but obviously it is because it’s working. At the point where it breaks, a solution will be invented.
            The internet will always be held together with duct tape, because ideas push technology to invent new realities. There’s just not time to go back & redo everything so that it’s most efficient. The internet will always be built on top of what’s there. And sure, time to market & things like that also play into it, which is always frustrating for anyone responsible for creating something. But that’s just, at the risk of sounding like a real asshole, “the speed of business.” Moreover, if people weren’t listening to Spotify, there’s a good chance they’d be torrenting, anyhow, which is much less efficient.
            No, it’s not the most efficient way to create a network. But it’s HARDLY deserved of your ire. Tell people on your network to use the web player. Tell people who use Spotify mobile to download the songs to their phone over wifi.
            These are all KNOWN issues that have been SOLVED.
            What Spotify is doing is not wrong or bad, it’s totally within the current realities of the internet, & it’s not an economic issue.

  3. Me
    Me

    Spotify better fix all the bugs in their latest update before they try to get any bigger.

    Reply
    • martel
      martel

      spotify recent updates are actually downgrades.
      have a paid sub to spotify for past year.
      never a problem until their 2 recent ‘upgrades’.
      now constant problems
      spotify has poor customer service and ignores users.
      read spotify community forums and you’ll discover all the unresolved problems with spotify.

      Reply
  4. Yves Villeneuve
    Yves Villeneuve

    Paul, why didn’t you mention Spotify’s previous grand plan of reaching 50 million USA subscribers in 12 months when they first launched? I think it would be fitting to add to this article.

    Reply
  5. ye
    ye

    “Don’t focus on the rate per stream because the major labels own my ass and make me pay them way more than the average artist.”
    Hey Paul, where’s your investigative journalism, how much are the majors making per stream??

    Reply
  6. Billy
    Billy

    Spotify can kiss my ass. How do you expect to be “so big” when you’re not available everywhere?

    Reply
  7. Clintone.com
    Clintone.com

    “Few have truly internalized the implications of the fact that the rate of change itself is accelerating” “It is not the case that we will experience a hundred years of progress in the twenty-first century; rather we will witness on the order of twenty thousand years of progress” – Ray Kurzweil. The future of music is not to ‘sell’ or even ‘stream’ music. The future is to sell the talent inself! I give it to 2023 when this will become reality.

    Reply
    • Visitor
      Visitor

      Selling the talent is also often how slavery worked in Roman times.

      Slaves were very often well educated and more articulate than their owners. Owners would have bragging contests about having the most talented slaves. They would show them off in all sorts of intellectual and creative feats. Owners didn’t expect to be better or more talented than slaves at all. They just had more power and the force of law on their side.

      Slavery in Roman times had nothing to do with ethincity either. Anyone could become a slave at any point if they fell on hard times. It was very arbitrary. You could also voluntarily sell yourself into slavery to pay your debts. This was the most common way.
      I am not sure Kurzweil is talking about anything new there. Just repeating history.

      Reply
  8. Jason Miles
    Jason Miles

    Uggh!! They always pick a the one person that something happened for. I hate that !!Then you have the rest who get paid like shit. I also realize that many many people who think they are artists but aren’t and just release crap because they can. The reality is there are many talented people out there who ARE receiving pennies and it ssucks
    peace,Jason

    Reply
    • steveh
      steveh

      “The reality is there are many talented people out there who ARE receiving pennies and it ssucks”
      Yes and likely to remain receiving pennies even if Spotify gets “big”.
      Because if we follow the horrifying logic of Ek all the extra income from Spotify getting “big” will be hoovered up by the likes of David Guetta!!!
      Honestly everyone – do we really want this Ek creature to become the most powerful man in the music biz? Surely not!

      Reply
  9. Visitor
    Visitor

    Luckily Paul will continue to be able to pay the bills by posting a new “The Sky Is Falling!” story every day. :p

    Reply
  10. dhenn
    dhenn

    What a load of crap. The same thing will happen here as everywhere else. The top 1% of artists will make a living and the rest of us will get nothing.

    Reply
  11. @LassiAl
    @LassiAl

    “David Guetta now has more than four million followers”
    I have hard times believing this. You mean 25% of ALL users are really THAT much into Guetta? Makes Spotify users really look pretty homogeneous posse!
    And what does he even mean? Following seems to be based on the Facebook integration, so this not necessarily connected to Spotify. So even if it brings added value to them, is hardly any sign considerable fan-band interaction or bonding they would like to boast.

    L

    Reply
  12. TUNE HUNTER
    TUNE HUNTER

    Elk is operating “fully loaded” portable version of Napster!
    Endorsment from Facebook gave a lot of hopes to labels and the grand theft by original Napster guy goes on.
    By my books current music industry goodwill is at over 100 billion dollar a year. Just convert Shazam, Gracenote, Soundhound and lyrics search to instant, mandatory purchase at $.29 (billed thru your cell phone) NO ID WITHOUT PURCHASE.
    At that point 85% of piracy will evaporate – Wow! it is so simple. Streamer or buyer, “you like it – you got it” @ $.29.
    Someone has to wake-up. Hey RIAA, do not litigate student for uncollectable $224K per song. Lets litigate Shazam and friends
    for percolation with music database and in 19 out 20 cases participation in theft.

    Reply
  13. mdti
    mdti

    Spotify has obviously not a single idea of the price of my rent… otherwise, it would prefer not to pay it 🙂
    or may be they are saying, don’t worry about the rent, because you’ll bne sleeping in the streets or subway ? in that case, sure, you don’t worry about the rent….

    Reply
  14. redwards
    redwards

    EVERYBODY on this thread has completly missed the point _ what Spotify said is true. Artist can afford to pay rent off of Spotify.
    Note he did not mention how many artist had to live in the apartment to pay the rent. Get 40 succesfull artist living in a two bedroom L.A. or N.Y. apartment and the math works out.

    Reply
  15. Scott B
    Scott B

    Spotify was great until last week . . . when it updated itself into something I barely reconized and could hardly use (without muttering swear words).
    The new model Spotify just plain SUCKS. It has none of the features that I enjoyed in the Spotify that I had just two weeks ago. Plus, it’s ugly.
    I’m not alone in my displeasure. EVERY one of my friends who’ve installed the new update are unhappy with it. We’ve told the ones who havent updated . . . DON’T. Live with the old Spotify for as long as they’ll let you.
    If I were a paying customer, I would’ve cancelled by now and I have zero plans to pay for something that I don’t enjoy using. I don’t enjoy using the new version. A total 180 from where I was with the old Spotify. In fact, I’ve already uninstalled it with the intention of rolling Spotify back to the previous version with the help of the “horrible update” thread on the Spotify help forums . . . but . . . I’m actually getting used to life without it. I don’t really need the hassle.
    I hope this fudged-up update really hits them where it hurts. They deserve to lose money for fixing what wasn’t broken.

    Reply

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