Bono Blames the Labels, Not Spotify…

bonopresident

Bono, speaking this week at the Web Summit Conference In Dublin…

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The real enemy isn’t between digital downloads or streaming.  The real enemy, the real fight… is between opacity and transparency.  The music business has historically involved itself in quite a considerable deceit.

But if we change that, and artists can actually see how many times they’re being played, where they’re being played, get access to information on the people who are listening to them, and get paid direct debit, then I think those payments will add up to something, as the world gets more transparent.

So when people pick on Spotify [pause]…

Spotify is giving up 70% of all their revenues to rights owners.  But it’s just that people don’t know where the money is going because the record labels haven’t been transparent.

That hasn’t been the demand, but that is going to be the demand.  And that’s the thing to look for: transparency or opacity.  For this new model to be successful and to take root, there has to be some kind of fairness, there have to be fair models of distribution.

And when that happens, the music business will be a rising tide that lifts all boats.

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Official White House photo by Pete Souza, available in the public domain.  Written while listening to Obituary.

45 Responses

    • Ugh, Economics Anyone?

      Spotify is not paying sustainable rates for the cost of goods. Look – it’s like this. If something cost you $100 to make, and someone else sells it for $10… it doesn’t matter that you are getting 70% of the gross, you’re still over 90% unrecouped on a per unit basis.

      This is the problem with Spotify and these arguments. It’s simple math and simple economics. The cost of music is not in the distribution of music. The cost of music is in the human labor of the CREATION of music. The CREATION of music is also more than the cost of RECORDING music. The cost of music is in the sustainable needs of the human labor for food, shelter, clothing, etc.

      Spotify can not scale and work.

      SPOTIFY MATH FOR THOSE OF YOU AT HOME WITH CALCULATORS:

      Just show me the math where streaming scales, I’ll wait. Spotify has 3m paid in the US at $10 each.

      $10 x 12 mos = $120 per year. Pay out 70% that’s a gross of $84 per year per subscriber. Simple Math.

      That $84 per sub is in revenue to all artists in rights holders. Times that by 3m and you get a whopping $252m a year in a $7b business.

      Multiple that by 10, to get 30m subs @ $10a month and that’s only $2.5b a year… and that’s a big IF Spotify ever gets to 30m paid in the USA… and IF they do, that’s ONLY 2.5b in revenue against the $7b now…

      So you effectively cut the revenue to everyone by 1/2 to 2/3rds… how does this math work without raising the price of subscriptions? It doesn’t.

      It’s just math.

      Reply
      • FarePlay

        I agree and we’ve been pointing this out for over two years. Both Pandora and Spotify are not committed to making paid subscriptions a requirement. Why? Because when they’ve tried to do it they lose subscribers immediately and stockholders and investors lose confidence….immediately.

        No question these are expensive start-ups and in order to raise money they’ve had to fast track subscription growth. The best way to do that….FREE. And unlike Netflix, Hulu, Sirius XM, etc. who all have strict rules about transitioning to paid subscription, the streaming music services have been offering music for free for years.

        No wonder music is perceived as valueless by so many. Making matters even worse, if that’s possible, Spotify and Pandora have been free for so long they’ve created a nearly impossible path to converting their free subscribers to paid subscribers.

        And now their whining about their inability to pay for music. I mean seriously, do you know any other business, aside from Walmart and now Amazon, where the buyer demands to pay less for goods?

        Speaking of which, if the music industry, musicians and songwriters had the vision and guts to stand up to these companies, like the book publishers and authors are standing up to Amazon, we might be able to change the entire dynamic of this situation.

        Instead we have a twenty-four year old woman standing up against the establishment. Alone. Oh yeah, she has her whole label behind her or with her or however you want to spin that detail.

        Reply
      • %

        This isn’t how Spotify works.

        The rights holder gets 70% of what’s netted on the the per stream rate. They don’t get 70% of a subscription fee, or ad generated revenue.

        Spotify calculates the per stream rate by taking a 90 day calculation of ad generated, and subscription generated revenue. They then remove “operation costs” and create the per stream rate for both.

        Those are then multiplied by the number of plays over the given accounting period and you get your payout.

        This is one of two royalties generated per stream, the other one is a to the Composer’s side via PRO (this is also what generates the sole royalty from their non-on demand radio service).

        There are a lot of arguments to be made here regarding spotify, transparency and streaming rates in general but I don’t think your math is proving what you want it to.

        Reply
      • dude

        Thats not economics dude

        Digital music streams are just 0s and 1s dude, they cost nothing (or near as makes no difference nothing) to create on a per-unit basis so there is no cost of goods to speak of

        The only cost is creating the original master, which is a fixed cost because you only have to do it once. That can be covered by selling a lot of streams at a low margin since “creating” more streams wont cost you any extra, and thats the economics of Spotify

        Coincidentally that was also the economics of CDs and downloads – the upfront cost of creating the master was covered by selling a lot of (relatively) cheap, low margin copies of it

        Reply
      • N

        You clearly don’t work in the industry…
        70% divided amongst different royalty pools in addition to substantial minimum guarantees…

        Reply
      • N

        You clearly don’t work in the industry.

        On top of the royalty pool payouts to content providers and rights holders that are up to 70% of gross revenue, there are very large minimum guarantees. In addition to this many Label/artist agreements exclude online royalty/profit sharing.

        Reply
        • dude is confused.

          dude – you are confusing the product with the container. The cost of music is NOT in the distribution of music (which is cheap). The cost of music is in the human labor of the CREATION of music (which is expensive).

          If something cost you $100 to make, and someone else sells it for $10… it doesn’t matter that you are getting 70% of the gross, you’re still over 90% unrecouped on a per unit basis. This is the problem with Spotify, is that it undervalues the true cost of goods.

          That, and Spotify can NOT scale. It’s just math. Try again.

          Reply
          • Anonymous

            “The cost of music is in the human labor of the CREATION of music (which is expensive)”

            Thats actually exactly what I said, but that cost is fixed not a cost of goods… once your album is done & turned in, that’s all the recording costs you have to pay for it ever, no matter how many copies of it you end up selling.

            So if it costs you $10,000 up front to record the album, you’d have to sell 1,000 downloads at $10 each to make up your costs, and anything on top of that is pure profits for you.

            Obviously Spotify is paying much less than $10 per stream but the idea is that they’ll make up the low per-unit rate with increased volume – so instead of selling 1,000 copies at $10 each you’ll be able to do 1,000,000 streams at $0.01 each and make the same amount of money.

            Whether that will pan out – in this case whether our hypothetical act that might have sold 1,000 downloads will also be able to reach 1,000,000 streams reliably and net the same – remains to be seen of course but the whole “cost of goods” line on this is just flat-out wrong

          • Anonymous

            Dude,

            You’re treating music as a durable good here as opposed to a nearly decommodified piece of content which is what it’s being transformed into.

            Even with Physical sales at their height and records costing 100X what it cost to make them now your math and logic is hilariously off base.

            We’re not selling Hondas. Have you ever actually seen a budget for a release, line by line expenses and year over year reports?

            Methinks not.

          • Anonymous

            Dumbass you dont have to jump in the studio to re-record every time you wanna serve a download, just like Honda doesnt re-develop the Civic from scratch every time they build one

            You’re not distinguishing between the master recording of your album (the blueprint for a Honda Civic to use your metaphor) and the copies of that master people buy/stream/whatever (what’s actually in the lots at your local Honda dealer). If you cant see why those are different things and need to be considered as separate, you are pretty lost

  1. J-Dawg

    I posed this in a thread that I think died:

    Why is the issue here NOT the lack of converting free ride streamers to paid users? Streaming is the way of the future, sure, but why does it have to be FREE streaming? Ad supported revenue can only go so far, it isn’t infinite. I get that people don’t want to pay $10 per album anymore, but what’s wrong with $10 or $20 per month to stream every album they can? You can have your trial version, where you listen to ads, and then you are cut off. Upset about it? Then pay $10. Just because the culture is “I want it for free” doesn’t mean that we have to bow down to that. I want gasoline to be free but I can’t roll into a station, fill up, and drive away without being arrested.

    To me, Spotify simply has no interest in forcing the free riders to a paid tier because then they couldn’t boast having 40 million plus users. The pitchforks shouldn’t be out for streaming in general, they should be out against the blatant refusal to monetize the free riders in a way that makes sense. Taylor Swift would have all of her albums on Spotify if they were only accessible to paying customers. Who wouldn’t?

    Reply
  2. Remi Swierczek

    Bono is one of the few connected ones that can start resurrection of music industry.
    He can shave a broom stick into Google/label created music molasses.

    Time to introduce new fair use act and convert Radio and streaming to $100B music store. SIMPLE and productive to all, including supplied by ads GOOGLE.

    Reply
  3. Matt Gray

    It’s not like songwriters aren’t making money. There are so many revenue streams it is crazy to go ballistic about this and boycotting streaming sites. Especially for hit songwriters whose songs are being played all the time on radio, TV, licensed arenas… Not to mention when a song is played live, royalties are involved.

    Reply
      • Anonymous

        I don’t hate Bono. I just think he somehow grew a face that feels like it should be punched. That’s all.

        Reply
        • Anonymous

          Great music. Don’t care, wanna punch him.
          Great humanitarian. Don’t care, wanna punch him.
          Cures AIDS. Don’t care, wanna punch him.

          It’s nothing about Bono’s attitude. Bono suffers from face punchiama, a medical disorder where the human face grows the right features that welcomes punches.

          Reply
  4. RIAA

    2014 first 6 months—- download: $1.3 billion (down 12%)
    2014 first 6 months —-streaming: $859 mil (up 28%)
    2014 first 6 months —- physical: $898 (down 14%)

    source: RIAA

    2014 full year prediction —-download: $2.444 billion (down 12%)
    2014 full year prediction —-streaming: $1.959 billion (up 28%)
    2014 full year prediction —-physical $1.670 billion (down 14%)

    2015 prediction: STREAMING WILL BE KING

    #1 Streaming: $2.5 billion (up 28%)
    #2 Download: $2.1 billion (down 12%)
    #3 Physical: $1.5 billion (down 14%)

    Reply
  5. Willis

    The root of all problems that the music biz is facing/dealing with/ignoring today were and are caused by the labels. That is a fact.

    Reply
    • Anonymous

      Copyright law isn’t enforced, thus reducing the scarcity of recorded music, and that is the labels fault? You’re a moron.

      Reply
      • Willis

        Thanks for your personal attack. You’re a child. Yes, labels need to deal with copyright enforcement more directly. “Copyright law” is in place just fine. The labels missed the boat a number of times and continue to not deal with it correctly. So, yes, it comes back to the labels. Wise up.

        Reply
          • Willis

            Historically, they blew it with MP3.com, Napster and other innovative new media companies. Further back, they blew it from the standpoint of over-spending. They currently are blowing it from the talent acquisition and development angles. Focusing on technology, the labels have one, maybe both, foot(feet) nailed to the floor. They do the same things when it comes to online marketing and promotion as they have always done. Cookie-cutter approaches don’t work for different artists with different fan bases. The labels are also missing the boat when it comes to integrating corporate tie-ins with their artists. Today, it isn’t/can’t be an old boys club like it has been, but that’s the way they continue to act. It’s no wonder why the industry is in steady decline…and will continue to be unless things change.

          • steveh

            It appears that you are saying a list of things that labels have done wrong, but I asked you what the labels should be actually doing – as of now.

            And the only thing you have said is “more corporate tie-ins”.

            Is that the best you can do?

          • Willis

            Try reading my comment again. Add to you list of one thing you picked out: artist acquisition and artist development. Labels are also guilty of optioning and shelving far too many artists, thus killing their creative. It’s sick. There’s more, too.

          • steveh

            I still don’t get you.

            Are you saying that the labels are responsible for the music industry decline by not signing enough artists and not investing enough?

            How are they supposed to do that in a savagely declining market ravaged by digital piracy and catalogue devaluation through “all you can eat” streaming services?

            Please tell me how the labels are supposed to do this (my original question).

          • Willis

            You’re not getting it.
            The labels blew it when it comes to embracing technology. This is a fact. Even though it is in the past, the errors will continue to have long-term effects on the state (decline) of the industry.

            The labels blew it, and continue to blow it, when it comes to developing talent. Are there even still people on staff that work with long-term vision of an artist, as opposed to quick hits and revenue? No.

            Blaming piracy for all the current ills is a cop-out. Look at the root of the problem and you will come up with the labels. Take a note from J&H Productions on this.

          • Willis

            Additionally, each time the labels have won a lawsuit against a tech company, taken a licensing advance from a tech company, or received any money from a tech company exactly how much of that has filtered back to the artists? I’ll tell you – nothing, zero, nada, zilch, zip…unless the artist sues the label. I suppose the labels aren’t to blame for this either?

          • steveh

            No I think it is you that doesn’t get it.

            You seem to have some kind of chip on your shoulder about the labels.

            I don’t wish to defend the labels, far from it, but your argument is a “straw man”.

            Yes piracy has harmed the music industry – not just the major labels but all the smaller indie labels as well. The labels did not invent piracy, and no-one has yet come up with a convincing answer to it – certainly not Spotify who just devalue music through their free offering so it’s almost like virtual piracy.

          • Willis

            As much as you claim that I have a chip (which I do not), you seem to find it easy to fall back on piracy being the issue. Piracy existed long before the Internet. While the scale was not to the same degree, it did exist. I’m dealing in reality here. Labels did, and still do, frontload artist sales of physical product only to reconcile huge returns against those units against the artist, push promotional and cutouts without paying artists, etc. Basically, labels as much as they were supposed to be partners to artists have always been the ones to rip off artists the most. If you disagree with this, you truly don’t understand the issue. Ask any artist instead of hiding behind the excuse of online piracy.

  6. Thedenmaster

    Bono thru Elevation Partners is one of the biggest shareholders in Spotify. He stands to recoup quite well after the ipo. Everything he says is financially motivated.

    Reply
    • Johnny Gagnon

      Absolutely 100% everything is political and this also means deceitful information is always a standard element involved and incorporated in the verbal exchange of information.(misinformation,disinformation,etc…)
      The big picture of global capitalist economies are always to render and process the largest part of the population of – have nots -and squeeze the hell out of them to make it accessible for the -have- segment to easily grab or pick anything that they can interprete ,by financial markets,as product possessing commercial value.
      This is the political social dogma of capitalism , inequality for the gain of the wealthy with the people’s government used as the backbone , the leverage , the framework and rules so the elites can have a casino royale of a time completely 100% at all your expense …. it’s a sell out sewer system by politicians and their kissing mouth pieces spokespeople!

      Reply
    • Anonymous

      How do you know that? Can you post a link with that info or you are just assuming that?

      Reply
    • Anonymous

      In the elevation partners webpage they don’t list spotify as part of their portfolio, only Facebook, Yelp and others.

      Reply
      • FarePlay

        Can anyone confirm that Bono Is in fact a direct or indirect investor in Spotify? If so, please provide links to your sources. I spent several hours searching under Bono, Bono’s birth name, elevation partners and “Spottily” investors and found no reference.

        Reply
  7. Johnny Gagnon

    With respect to a great songwriter , labels are a small percentage in today’s market , the majority are independent artists ….
    In the music business context , I would say he made such a left field statement to make a diversion or disinformatio tactic from the seriousness of the subject like all politicians know this type of manoeuvre very well…..
    Bono is a wealthy elite today rubbing elbows with a corrupt establishment of globalists controlling international corporations and thats why we see him with their salespeople such as Pres.Obama.
    Don’t believe what these corporate dictators and their mouth pieces say,their only game is to keep stealing as much as they can from the defenseless poor and weak so that they may have greater profits for themselves and their exclusive social class….. the truth is everyone is being ripped off by streaming,if people had brains they would stop streaming and be intelligent to turn the tables on these profitting off people’s backs snake-oil crooks and salesmen!

    Reply
  8. Been There

    2013 – Spotify doesn’t pay on a “per song stream”. Total royalties are split among those that hold the copyrights based on the percentage of total streams or the artists’ songs. In 2013, Spotify estimated that the average song generates between $0.006 and $0.0084 per stream in royalties. Spotify states 70% of Spotify’s profit goes to the Artist (or *label) that means Spotify receives 30%. So if an artist (or *label) earns $0.07 average per stream then Spotify is earning $0.03 average per stream – a profit of around 43% for Spotify. **I agree with the person who said most artists are independent – but most independent artists are undiscovered. Most bands/artists that are heavily streamed on Spotify are not independent. It is almost impossible to write, produce, engineer, distribute, advertise, or sell any music to markets without a label (or a considerable amount of money) backing the band/artist. I also disagree with the owner of Spotify who states he is “helping” the artist by trying to eliminate piracy…give me a break…the old saying goes “Don’t pee on my leg and tell me it’s raining!”

    Willis, I can tell you have been or are part of the industry. You are correct – labels have wrung dry their artists. Piracy has been around forever. In the past, the thing about piracy was a person could get a okay sounding recording and listen to it. If they really liked the CD, they would go buy it to get the better sound quality. With technology today, a person can turn out a number of high quality CD’s in minutes. So, in essence, the artist is screwed no matter what!

    Reply

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