You Can Kiss Spotify’s Free Access Model Goodbye…

dougCEOfyoupayme

Last week, the head of Universal Music Group Lucian Grainge explained that ‘freemium,’ ad-supported subscription services weren’t working for anyone except (a) streaming services and (b) music fans.  The week before that, he fired his longtime head of digital Rob Wells, a big Spotify cheerleader.

Now, Sony Music chairman and CEO Doug Morris (pictured above) says free music is causing the death of the music business, while all-but-promising massive changes ahead.  “Basically, I equate ‘free’ with the decline of the music business,” Morris told Hits Magazine this week. “Why should anyone pay for anything if they can get it for free? In certain instances, it’s worth a discussion.”

“But in general, free is death.”

“Free has been way overdone, and the biggest culprit is YouTube, with their links to free sites. This has to be curbed if we’re going to have a successful business.”

“If there’s a subscription model that gives people what they want, it’ll work.  I believe Jimmy Iovine will do well with [a paid-only] Apple Beats; he knows how to market things brilliantly.  He’ll make it sexy enough to have a real chance.  They’ve got 850 million credit cards and $160 billion in the bank—that’s a good start.

“Daniel Ek from Spotify deserves a tremendous amount of credit for pushing the rock up the hill.  Everybody’s trying to find the magic key to open that box.  But no one’s done it yet.”

“I hope they both win. We’re counting on it.”

 

178 Responses

    • The Amazing Power Of Calculators!

      …it’s amazing the conclusions that can be reached when people actually do real math…

      Reply
      • Sarah

        I doubt it’s that they haven’t already done the math. I bet in many cases, they’ve always known the math doesn’t work but the investor community (at large) doesn’t expect companies nowadays to be profitable or sustainable: it just requires them to get lots of traction and grow so the investors can cash out for a nice payday. That’s how you wind up with smart, educated people talking about some magically profitable future even though they know it won’t happen- they just have to get other people to believe it.

        Of course, I don’t think everyone who supports existing streaming models has a shady agenda; I’m sure some of them have put so much into it (with good intentions) that they now honestly see only what they want to see. But that’s where you have to come back to the math. 🙂

        Reply
  1. Big Swifty

    Why did it take them so long to figure this one out?

    It seems like the executives at the major recording companies have absolutely no idea what they are doing.

    They (the record labels, venture capitalists, and other greedy sorts) will listen to anyone from silicon valley who is selling magic beans

    Reply
    • Remi Swierczek

      They are still blinded by science or most likely 2016 Grammy event!
      Both, Mr. Grange and Mr. Morris have big hopes in Apple/dead-Beat entry to streaming.

      Gentlemen, I have bad news for you! You are just forcing another miss-informed entity to DEAD END TUNNEL!

      Most optimistic global revenue of premium, sub supported streaming is at max $25 billion.
      300M x $7avg x12 = $25.2 Looking SiriusXM 25M subs paid by the best of the best in our society 300M will never materialize.

      My suggestion STOP NOW!

      Just convert Radio, streaming and elevators to primitive discovery based $100B music store.

      No-brainer with all resources at our disposal! $100B music industry by 2020

      Reply
  2. Taams

    It sounds too good to be true…. and you know what they say about things that sound too good to be true…

    Reply
  3. Name2

    More “Fuck You. Pay Me” fun facts:


    Spotify’s payments to Universal […] are projected to account for 16 percent of the music giant’s recorded music revenue by March 2017 — up from 11 percent for the April 2015 to March 2016 period.

    In addition, Universal, which owns a stake in Spotify, will get 39 percent of its pretax earnings from Spotify by 2017, up from 28 percent over the next 12 months, according to the email, which factored in Spotify estimates for Universal’s growth.

    LOL Universal’s on welfare.

    Reply
    • FarePlay

      This is one of those times when being anonymous or Name2 comes in handy.

      The. charade is over, unfortunately it may have taken too long.

      Reply
    • Paul Resnikoff
      Paul Resnikoff

      If UMG keeps Spotify’s free/’freemium’ game going, then they are severely hobbling Apple’s launch (and Jimmy Iovine). Forcing a paywall when Spotify doesn’t have one is (as I’ve said before) a suicide mission.

      http://dmnrocks.wpengine.com/permalink/2015/03/06/apple-streaming-suicide-mission

      Spotify feels that their freemium model works, that it actually drives people to paying plans (of which there are 15 million). That’s debatable, but how many are listening for free and will never convert? I don’t think most people know that number; it’s far larger than you’d imagine. And a big bulk of actual revenues come from paying subscribers.

      Reply
      • Fareplay

        “If UMG keeps Spotify’s free/’freemium’ game going, then they are severely hobbling Apple’s launch (and Jimmy Iovine). Forcing a paywall when Spotify doesn’t have one is (as I’ve said before) a suicide mission.”

        Paul, I totally agree with this first sentence.

        Right now, if I’m running a major label I’m looking at Apple / Beats as one of the few hopes to pull the industry out of this suicidal tail spin. http://www.huffingtonpost.com/william-buckley-jr/can-apple-save-the-music-_b_5769630.html

        Here’s what was being said one year ago:

        Sleepwalking Into a Post-CD Collapse

        “……My overriding concern then was the same as it is now, namely that the music industry does not have a CD buyer migration strategy and it desperately needs one.  So much so that unless it develops one it will end up sleepwalking into a CD collapse.” http://musicindustryblog.wordpress.com/2014/03/18/ifpi-and-riaa-2013-music-sales-figures-first-take/

        “….today’s average consumer is far less technically savvy than some in the industry and media might hope. Charts showed that two-thirds of music revenue worldwide is still based on physical sales, and that terrestrial radio is still by far the way the vast majority of people discover new music.”

        http://www.billboard.com/biz/articles/news/1552283/consumer-data-shows-old-ways-still-most-profitable-sxsw-panel-says

        Reply
        • Remi Swierczek

          I agree, terrestrial Radio and Pandora do well over 50% of discovery! Go to Nilsen for anyone in disbelief!

          Conclusion: Convert global Radio to traditional music store and enjoy $50B music industry tomorrow.

          Just reduce display information and ENSLAVE SHAZAMS THE PIMPS as WELL FED cashiers of music.

          Reply
      • JTVDigital

        It won’t be the first time the music industry encourages cannibalization between different services and business models they support. Remember they are on a short term logic (as someone else explained with the fiscal year divided into quarters and shareholders expecting constant growth,etc.).
        Actually they’ve done this since the beginning of “digital” music. Which is quite understandable when you look back at the comments from the man pictured on this DMN article, they had (and still have) no idea what they were doing / which route to take (can we really blame them after all? at least they tried different things that did not all work).
        There is no global strategy to shape market and consumers’ demand in the most sustainable way, simply because the market and the consumers expectations are changing all the time and would require a constant adjustment, what big corporations are totally unable to achieve (and that’s perfectly fine, the bigger a company is the more inertia there is).

        Reply
        • FarePlay

          JVT Digital. Hmmm, I don’t see anything about music in your company name. Now, I can’t speak personally to you because I don’t know your business, but one of great disconnects between tech and music is the tech guys, for the most part, just figured they would take over the music business using everything they knew about digital distribution of content, data management and Internet marketing.

          Let me share this quote from Mr. Ek as to his reasons for getting into the music streaming business:
          http://www.quora.com/How-did-Spotify-get-started-1/answer/Daniel-Ek?srid=trP4&share=1

          Now, here’s a relatively young guy, from a relatively small music market with no background in the music business coming up with a business idea, well not really, he does credit Napster, with the cajonies to come to the US and convince the record labels that Spotify would take out piracy, give them a piece of the action and even pay them, something, to play all of their songs.

          No more messing with manufacturing CDs and monetizing everything, no matter how bad, every time someone streamed it. Forever.

          So JVT, I ask, what’s this experience and knowledge you speak of? These brilliant programmers that sit around figuring out how to get more of a shrinking pie? And you don’t think Pandora has stockholders to answer to every quarter and the investors in Spotify simply just keep asking how much Spotify is going to need next quarter to keep them afloat?

          Reply
        • Name2

          The rootkits on Sony music CDs was a … shall we say … festive approach. Was that under the bold leadership of the troll in the picture, or was someone else in charge?

          Reply
    • FarePlay

      We can start by cleaning up the laws, eliminate Safe Harbor by amending the law to “take down > stay down” giving the power to the creator and/or copyright holder. Those filing false claims will be punished along with the website owners and operators. All websites must be registered to a real owner, who will be named in any legal proceedings. Not a domain name that can slink off in the night to another 3rd world country.

      With the devaluation of music, we need to even more diligent and aggressive with digital theft.

      We may never totally eradicate online piracy, but we can certainly turn the heat way up.

      These claims are filed by the rightful owners, so let’s leave the free speech card out of the discussion.

      Reply
      • Versus

        All excellent suggestions. Are any of these on the table? Perhaps in discussions between music industry associations and the government?

        If not, we all need to push harder to have our concerns heard and taken seriously.

        DMCA is already a joke, the “safe harbor” doubly so, as the harbor has been made safe for the wrong ships: pirate ships.

        Reply
        • Anonymous

          “the harbor has been made safe for the wrong ships: pirate ships”

          True.

          Reply
  4. Name2

    I can haz different article pic?

    DM is ugly to look at, and he’s nothing but a leech.

    Reply
  5. GGG

    sigh, we get it, you don’t like the music business. Maybe stop annoying everyone on a music business website.

    Cue crying about me treating you poorly in 3…2…1…

    Reply
        • Bandit

          I’ve also been a victim of the “Delete a rant” after posting a reply. Sometimes the reply gets attached to another thread then it gets very confusing.

          Reply
  6. Anonymous

    “Why would anyone want to support the music business anyways?”

    Because it makes music?

    Reply
    • Big Swifty

      Wrong

      Musicians make music, song writers make music

      The other 90% of the “music business” is executives, accountants, lawyers, distributors, publishers, publicists all squeezing their juice

      Reply
      • Paul Resnikoff
        Paul Resnikoff

        You can hate the industry as much as you want, but the reality is that without capital, and companies and executives to deploy that capital, a large percentage of the artists you love would still be mired in obscurity. In fact, you could argue this role is more important in the current climate, where the noise level and amount of distraction has reached unprecedented levels. It takes more money, better strategy, and more work from more people to succeed.

        Reply
        • Name2

          Feel free to discuss: Brian Epstein signed away the Beatles’ publishing to get them booked on TV shows.

          Reply
        • Big Swifty

          I don’t hate the music industry. The marketing people are necessary if one wants to be seen or heard. And others do their job and get paid.

          However, the attitude in the music industry has radically changed. Thanks in large part to the tech industry selling themselves as the panacea for the music industries ills. Artists are now “content providers” whose contribution has been devalued to near zero. Scale and market share are the ONLY considerations. The executives in the music industry seem to understand that one point very well.

          Mr. Morris clearly illustrates he has no idea what he’s doing these days when it comes to digital distribution so he outsources the problem to a slick talking magic bean salesman. OK that’s alright companies make mistakes all the time and THEY pay the price

          As you know, this deal is different … his lawyers pointed out that this new magic bean business venture is unlike other business propositions this one has no risk for the company, he could take huge advances and equity from any new digital streaming business AND pay artists under contract very little or not at all. Didn’t matter if the whole business model failed because the risk wasn’t on the company it’s all on the shoulders of the artists under contract.

          Lawyers get fat bonus for pointing out the standard clause in the contracts.The executives get to keep the cow, spotify keeps the cream and artists get booted down the road with a handful of worthless beans

          Reply
  7. Anonymous

    Save & re-publish this article 1 year from now. Spotify free tier will still exist.

    This public posturing is all designed to make Spotify and YouTube squirm as UMG and Sony agreements with both are up for renewal/renegotiation. If in the meantime their public posturing can assist their old buddies Iovene and Apple get a stronger foothold at launch (further making Spotify & YT squirm) all the better for them. This is all theatre – 100%.

    Reply
    • David

      You think firing* Rob Wells was just ‘theatre’? Was Wells in on the act?

      *not officially fired, of course – just ‘parted company’ after a fundamental difference of policy. But when you have a difference of policy with your boss, it comes to much the same thing.

      Reply
      • Anonymous

        @David, my guess…collateral damage. Rob Wells didn’t make decisions for UMG unilaterally. It’s one thing to hold an employee responsible for underperforming or insubordination but to hold Wells directly responsible for an entire philosophy for the organization’s business would be a shining example of lack of buck stops here leadership. Anyway, what’s a little firing or two stacked against the hundreds of millions of dollars of flat money and revenue guarantees that UMG is no doubt looking to extract from Spotify. Wells gets a nice going away package in exchange. No harm, no foul all around…oh, except all the rest of us who continue to struggle to stay afloat as UMG pursues its next round of short sighted, damaging digital licensing strategies.

        Reply
    • JTVDigital

      Agree.
      Complete bs. Major labels are the ones who “created” streaming since they were desperately looking at ways to stem physical records sales and piracy + create an alternative revenue stream in parallel to downloads (and ringtones, at that time).
      What an interesting timing to suddenly hear all these big mouths as licenses terms are being renewed / rediscussed between majors and streaming platforms…

      You can’t force people to pay for something they can get for free super easily, unless you make sure it is impossible to get it for free, which in the case of music is obviously not happening since no real political / police actions were taken to eradicate piracy…so far the only company who succeeded in partially (and in some countries only) eradicating piracy without using force is Spotify.

      If they put restrictions and create frustration again amongst consumers, in a few months from now illegal content consumption will be on the rise again and sites offering unlicensed material will pop up everywhere to respond to the public demand of free music.

      The ad-supported model works, but more (and better performing) ads and more users are required to make it viable for content owners.
      More users = increased CTR = happy advertisers.
      With a higher CTR, platforms would then be entitled to raise the CPM, which ultimately means more revenue distributed to the content owners.

      Reply
      • Sarah

        JTVDigital

        The ad-supported model works, but more (and better performing) ads and more users are required to make it viable for content owners.

        As Milton Friedman said, “I would love to have a cat, provided it barks.”

        You’d love to have the ad-supported model, provided it has different qualities and results.

        We have a platform behind RepX that’s very advanced and can be adapted and expanded easily and quickly. You show me how an ad-supported model can pay better – specifically, please, numbers here, we’re running a business – we’ll give it to you in 1-3 months. How’s that for a deal? 🙂

        It’s not that no one wants to give you fully ad-supported that can also magically pay better – seriously, it’d be an instant, easy winner and you’d almost certainly already have it if anyone could actually make it happen. But no one can. So if you have some secret insight as to how what you want is realistically attainable, do music and the world a favor: please share it with the rest of us.

        JTVDigital

        You can’t force people to pay for something they can get for free super easily…

        Spot on. But you can make it so they choose to pay by making paying affordable and nearly effortless, and by providing a better experience (with the artist and improved engagement) than they can get for free. People (as a rule; there are exceptions) aren’t thieves, like nice things, like easy things, and support causes/people/businesses/artists that they like. Rather than trying to force them to pay, set up things so that they choose to pay.

        That’s what RepX is doing. You should talk to us and get a demo.

        Reply
        • JTVDigital

          Well, YouTube is an ad supported model. And it generate tons of money for the music industry.
          But they have 1 billion free users whereas Spotify only has 60 millions.
          Sure not all are interested in music, but between 1 billion and 60 millions there is certainly some growth potential to explore for the “free” model…

          Reply
          • Sarah

            You can’t just mention totals, though. That’s not a meaningful response.
            They generate tons of money for the music industry … but how many people and companies is that money dividing between? A billion dollars split between a billion people is not a good per capita income.

            And you say here they generate tons of money, but before you asked basically for a better-paying ad-supported system. So “tons of money” isn’t enough, apparently. Okay, let’s agree on that. How do you get better ad revenue? That means that you need many more ads at the same prices, or higher individual ad prices on the existing number of ads. YouTube is an ad machine in a very active ad marketplace; if they can’t make that happen, what makes you think it’s possible?

            YouTube would already be charging more if it could, but it doesn’t which suggests it can’t. So let’s consider the other option: many more ads at the same prices. But economics just doesn’t work like that: increase supply a lot (“many more ads”) while keeping demand constant (how do you propose to increase the demand?) and the price doesn’t stay the same, it goes down.

            Next, more users. You say (1) that you need more users to make the ad-free model work and (2) that YouTube has a billion users. So, in order to make the ad-free model work we apparently need more than a billion users on a single platform? Exactly how many more will it take to make the model work – 2 billion? 4 billion?

            When you’re requesting more than a billion users, why stop half-way? How about “the fully ad-free supported streaming model can work, we just need to get every single person on the entire planet to consume content as a free user in a single system”?

            Believe it or not, what I propose – a switch to a PAYG streaming model – is actually way more realistic than what you propose.

          • JTVDigital

            The idea was to say there is still some potential for ad-supported streaming, it was an example…
            The value of ads (CPM, CPC, CPV…Etc.) mechanically increases if there are more users = more clicks (CTR) and conversions.
            Not all 1 billion YouTube users actually care about music, maybe 200 or 300 millions do.
            How do you increase the demand for free music? You don’t but it is possible to tip over the free AND illegal music consumption to free and legal/controlled/monetized (whatever you call it) consumption.
            This is where the potential is. But it requires a mix of political and technical actions and is certainly not easy to achieve; the other problem is that so far not a single real decision was made to tackle this issue.
            There is not 1 unique ad-supported magical solution, ad-supported responds to the somehow high demand of free music, subscription-based offers are for the people who can afford / want / feel comfortable with paying for music.
            Never forget most people use ‘the internet” for 3 things: checking their emails randomly, facebook and youtube.
            They have some spare time? They go to facebook. Feel like listening to some music or watching stupid cat videos? YouTube is the destination. And that’s pretty much it.
            You’d be surprised to see how many people: 1) don’t give a f$*k about music 2) don’t use iTunes 3) never pay for anything online.
            This is where there is still potential, convert the non-music fans to ad-supported or (ideally) paid usage of music services.
            This is why the bundle offers “work”, when a Spotify or Deezer subscription is included in a phone plan, for example, making it “painless” for the user who do not exactly know what they are paying for anyway.
            This industry has exhausted the traditional music consumers, going from vinyl to cassette to CD to mp3 to streaming, etc, each format becoming obsolete at some point and constantly questioned by the same people who initially pushed for it.
            And Millennials will never ever pay a dime for digital content (at least not consciously) – “free” is in their DNA.
            (yes, there are exceptions, D2F initiatives that sometimes work, Bandcamp, etc but all this is very marginal and not about mass consumption and revenues).

        • Anonymous

          “As Milton Friedman said, “I would love to have a cat, provided it barks.””

          Hehe yeah, and I would just love RepX if…

          Also, you’re right that artists and labels want more money from YouTube. But guess what: Nobody really complained about it until last summer.

          What really pissed people off was Music Key and Google’s new contract.

          We all loved the free, ad-supported YouTube — it was growing like crazy, Content ID was available for everybody, you could use the service for non-cannibalizing trailers, interviews and behind-the-scenes and make exclusive, better-paying releases elsewhere.

          Now it’s all over, and we need a replacement.

          Reply
          • Sarah

            DailyMotion, Vessel, Videscape…. people are trying to give you what you want. (Vessel has that windowing subscription but it’s basically YouTube other than that.)

            It’s not as easy as saying “this is what we want, just make it happen.” If it were, you’d already have it. 🙂

          • Anonymous

            “If it were, you’d already have it”

            Not so fast, it all happened in June 2014 — you can’t expect an alternative to pop up in less than a year…

          • Sarah

            DailyMotion is basically a YouTube copycat, same model, popular site, healthy user numbers and traffic… so why exactly doesn’t that one fit the bill?

          • Anonymous

            I have to admit I haven’t looked at that site for years. Which may be a mistake. I stopped by now and it looks pretty nice. Seems to have a better reputation, too.

            Still, there’s a long way from 60m daily views to YouTube’s 1.2bn. And I have no idea what the monetization situation is like.

            Hm, why did you have to bring this up? 🙂

          • Sarah

            Because I like you, Anonymous 🙂

            (and I want you to have what you want)

          • Sarah

            Ummm….. thank you? 🙂

            Let me know what you think of DM after you check it out. They’re smaller than YT but I think it’s the second biggest of that model.

          • Anonymous

            I thought I made it pretty clear I’m not going to try anything pay-per-view… 🙂

            Listen — imagine you just cut this gorgeous track and you really, really want to show it off.

            What would you do — hide it in a store, or upload it to a free, ad-based site where everybody knows your name, tra-la-la?

          • Sarah

            DM is both – you don’t need to do paid. I meant check out the DM site overall, and that includes the free side where most of their traffic and content is. Why argue when there’s no need? 🙂

          • Anonymous

            Oops, right.

            So I use an ad-blocker [blush]. Sort of ruins the entire discussion, doesn’t it…

          • Anonymous

            Speaking of copycats, though — here’s a funny thing:

            “OpenVOD gives you full control over the sale and packaging of your content. Only you get to decide the price you wish to charge for unique pay-per-view rentals”

            SOURCE: Dailymotion

          • Sarah

            Awesome! I’ll check it out, let me know what you think if you try it (which you totally should).

            And I’m not using “copycat” as an insult, btw, just as shorthand for “implements the same business model and basic experience/process for both consumers and artists.” That gets wordy, and I’m plenty wordy enough 🙂

          • Anonymous

            “and I’m plenty wordy enough”

            You sure are. Wordy and brainy and pitchy and smart. 🙂

          • Sarah

            No “friendly”? “Sincere”? Even “possibly misguided but well-intentioned”?!? And here I thought we were becoming friends (who disagree, but still). I’m not giving up on us, Anonymous 🙂

  8. Versus

    Good. There should be no free tier until and unless its advertising can pay rights holders properly.

    Reply
    • Fareplay

      Wrong. Not only should there be NO Free service, especially for interactive streaming services, they also need to open the door for a corporate sponsored, paid service.

      Reply
    • Anonymous

      “There should be no free tier until and unless its advertising can pay rights holders properly”

      Indeed — but YouTube’s free tier could easily pay right holders properly today.

      YouTube’s net revenue, after payments to partners, was $1.5 billion in 2013. That’s more than it paid to right holders in total since 2005.

      Imagine a free, ad-based YouTube alternative — owned and operated by artists.

      Bye-bye iTunes, Spotify, Google…

      Reply
      • Versus

        Right. And by all expectations, YouTube should be rolling in money, with 1 billion viewers. However, YouTube claims to operate at a significant loss. Is there a bit of book-cooking going on in Google’s kitchen?

        Reply
  9. Musicservices4less

    Maybe I can’t fully say “I told you so” but I told you so. The political, national security concerns and other issues, are starting to bring to a head the government war with Googley Goo and necessarily its YouFree I mean YouTube division. Fortunately music is part of that. And finally the music industry is going after the right copyright infringer, not it’s customer. Finally, they are publicly speaking out on the real issue and taking the matter to the public to show what a monopoly Googleman really is. Finally, the are willing to do battle with the Goliath. Keep in mind, the music industry in this arena is really David. It is the movie industry that has the biggest club.

    OK, my rant is over. Now for the DM news. The initial regs have been published (about 400 pages) and copyright only shows up on four of those pages. The good news is always referred to as non-infringing copyright or legal content. Yes, you nay sayers, there is specific language that says the FCC will not interfere with the Safe Harbor protections afforded under the Copyright Act to those providers on the Internet that qualify. But that mere statement shows that IF THEY CHOOSE TO, they can change their mind on that subject at any time and go head to head if they feel that the players are not “reasonably managing” that aspect of their business.

    I’m just sayin’

    Here’s the link if you want to do your own research:

    http://www.documentcloud.org/documents/1686018-f-c-c-net-neutrality-rules.html#document

    Oh and go vote in 2016 not matter what side of this you are on. Please.

    Reply
    • Anonymous

      Saying Google is responsible for piracy is like saying the government is responsible for what every last doughnut does on their roads, so goodluck putting them on the stand for human trafficking all because it happened on a road…

      Its like if there’s some ahole abusing a woman in some room, the one that opens the door to expose it is not the one held liable or responsible for the crime being committed…

      the music biz sees Google’s.big fat. pockets and decides to go after them, after attacking those who download files for listening pleasure, all the while never going after who physically uploads and makes available the property?

      Who’s running the music biz or else what’s really going on? its ridiculous thinking…

      Reply
  10. Rick R

    Lets just turn back the clock 10 years and see what happens.
    It is proven and undeniable that if the music buying pubic can’t get their music for free legally, they will get it for free illegally.

    Reply
      • Musicservices4less

        Hi Rick R

        It is proven and undeniable that if the music buying pubic can’t get their music for free legally, they will get it for free illegally.

        Wrong, what has been proven is that even if the music buying public can get music for free legally, a huge majority still get it free illegally.

        As I have previously commented, the industry has historically been to able to stand a percentage of about 10% – 20% all combined illegal types of losses. With the onset of the new methods of distribution on the internet and its use in general, that percentage is over 50% an unsustainable and intolerable percentage. No industry not even the beloved technology industry has that.

        Reply
        • JTVDigital

          “even if the music buying public can get music for free legally, a huge majority still get it free illegally.” That is correct and it’s called human nature 🙂
          So…the solution is then to make it even more difficult to get it for free legally?
          Is that a logic like “nothing left to lose let’s try to make a few millions pay something” instead of trying to better monetize (while REALLY fighting piracy) “free” music that several hundred millions of people want and search for every day?
          With the risk of repeating myself, it is VERY easy to de-index illegal files from search engines (which is a softer method than sending troops in countries hosting illegal content), there are several companies that are able to technically do this.
          Why are the major content owners not investing more in these technologies?

          Reply
          • Sarah

            Hopefully because they learned from DRM that you don’t want to turn this into a tech fight?
            You’ll build something to protect music, the internets will build something to get around that, you’ll build something better, they’ll build something better ….

            Don’t go to war with your audience. If you reduce the industry to a tech war, there’s really no winning. Find ways to give them what they value, in a way they want, and they’ll pay you for it.

          • JTVDigital

            I was referring to de-indexing links from search engines. It is very efficient and makes the illegal files/links invisible.
            This is not going to war against the audience at all, this is about making sure the audience has no other choice than using a legal source (freemium or not, it doesn’t matter).

          • JTVDigital

            Not at all.
            DRM = Digital Rights Management
            There are (were) several types of DRM.
            – OMA DRM used for delivering to mobile phones: Forward Lock (FL), Combined Delivery (CD) and Separate Delivery (SD).
            With FL, there is no license, it’s just a tag added to the content saying “no rights to transfer” (to a third party). There are more subtle settings but basically that’s it.
            With CD (Combined Delivery) the license is delivered simultaneously with the content (encapsulated).
            With SD the license comes asynchroneously, which offers enhanced security (and distribution complexity).
            – Apple Fairplay DRM: this was the proprietary DRM from Apple
            – WMDRM: proprietary DRM from Microsoft for Windows Media codec
            + there were many other proprietary DRM technologies on the market

          • Sarah

            Thanks for the explanation, but I didn’t mean in implementation. I meant, “wasn’t the ultimate goal of DRM also to make sure the audience has no other choice than using a legal source”?

          • JTVDigital

            Not really, it was protecting and setting usage rules to the legal content.
            Which made legal content tedious to acquire and use, so the decision was made to abandon DRM.
            Now the legal content is delivered unprotected (I mean for downloads).
            YouTube and Soundcloud streams are not protected neither, anybody with the url can download or convert the “source” file.
            And there are tons of p2p, file lockers, etc hosting illegal files.
            So here is the situation now: we have a viable (meaning with most of the music ever digitized being available) legal offer, was it for download or streaming, either free (ad-funded) or affordable, coexisting with the exact same offer, completely free and totally illegal and out of any control or monetization.

          • wallow-T

            Sarah: “I meant, “wasn’t the ultimate goal of DRM also to make sure the audience has no other choice than using a legal source”?”

            That was the pipe dream of the SDMI project (Secure Digital Music Initiative) — get everyone hooked on music players which would originally play pirate MP3s as well as authorized DRM’d music files, and then at some point roll out a forced software upgrade to take away the MP3 functionality and only permit DRM’d files. SDMI collapsed around 2001.

            One could theoretically create a player which would only play DRM-authorized files, but as a practical matter such a player would fail in the market.

          • Sarah

            Thanks for the info, wallow-T. I maintain that fighting free/illegal use isn’t likely to lead to a solution; creating a system where people choose to pay because you’re giving them something they value the way they want it and that they can’t get for free (even if they can rip the music illegally) is the solution.

    • GGG

      Eh, I agree but disagree. Ease was a HUGE part of what made piracy thrive. It was all just right there for the taking. With local storage now, why even download? And for $10 a month, music on streaming services basically is free, not to mention the monthly access fees are becoming normalized with your Hulus and Netflixes, etc.

      I think with a good industry-wide plan, premium streaming can certainly happen because it’s EASY. Whether that’s Spotify or Apple or Deezer, whatever.

      Reply
      • Sarah

        Piracy should be less easy than paid. Piracy has real costs – time, uncertainty that you’re getting what you expect in the quality you want, crazy obnoxious ads, and the worry in the back of your mind that just maybe you’re clicking on something that’s going to eat your computer.

        When you start paying attention to the fact that there are in fact costs other than price (time, ease, convenience) and that many consumers care about the experience, you can start building a system where paid can compete with free/illegal.

        Reply
        • Anonymous

          It will only push piracy underground and to the dark nets and vpn’s, which is where the supposed honest legitimate persons and corporations engage in it, so either the problem gets cleaned up or swept under the rug, and you can be sure they will just sweep it under the rug a d keep on stealing from the little guys, like me, to make their junk becuase they are uncreative and unimaginative and doing the wrong job for the wrong reasons… I see the music industry as one of the biggest players, facilitators and benefactors of piracy… anyways…

          Reply
          • Sarah

            It’s pretty clear that you don’t like the way things are now. Which means the options are to try to change it and make things better, or accept and live with it; but don’t waste your life on just complaining about it.
            Stopping at “things suck” is never going to make anything better – if you can’t live happily with the way things are, you need to move on to “let’s do something to make them not suck.” 🙂

          • Anonymous

            case in point Sarah, i’ve been saying similar and near exact things for many many years, finally its starting to make the mass media more and more, not that these arent thoughts and discussions that havent existed for a long time, its just being done in a more calm and positive manner these days… im just not public the same way and nor do i have the system credentials to make my voice worthy of listening to or placing as some authority on anything…

            a point is made about music in the video…

          • Anonymous

            “If you have followed my whole life and career, public and private”

            Dude, your spam is really really boring…

          • Anonymous

            Dude, your spam is really really boring…

            Thanks for your comment and your time in responding on the matter…

            Im not spamming and i dont spam, theres a big difference between those who spam and what i do, it actually hurts a little you would think of such and its actually a little defamatory to me and i would appreciate that if you dont like me, then please just move on, no need to bully people, thanks…

            Furthermore, I didnt start this, someone asked me questions and therefore i was prompted to post as such, im sorry you dont like me but no one is forcing you to read or follow what i do, so if it what i do is truly that boring to you, just feel free not to read and then not to reply in any way shape or form…

            The reality is the internet needs to be cleaned up from this kind of stuff, theres just zero need or reason for you to jump in and say anything at this point. You and your people always do that, never ever offer anything of constructive criticism, take a huge long post and pull out one little sentence out of context that you then use to throw your stones and take your pot shots, it just needs to stop, theres no reason for it…

            The reality of the matter is i do something that you dont like or i threaten you and therefore you and your people for some reason still think there is some benefit to treating me as such and constantly attacking me everywhere i go, especially on the internet…

            Thanks again…

          • Anonymous

            Hate to break it to you, but if people are attacking you on Pokerstars, too….the issue is obviously you. I mean, christ man, the world isn’t stalking you trying to shit on your day. You obviously bring it on yourself.

          • Anonymous

            Hate to break it to you, but if people are attacking you on Pokerstars, too….the issue is obviously you. I mean, christ man, the world isn’t stalking you trying to shit on your day. You obviously bring it on yourself.

            Hi there…

            You arent breaking anything to me, but what you say is only an aloof misinterpretation of the reality of what is happening…

            Yes i certainly am a certain way that helps to cause these things to happen, ive seen it my whole life, but im not sure im the issue in this sort of situation, and the reason i say that, is because its happened my whole life, ive always been very popular but also extremely bullied and teased and people are always trying to get one over on me, for sport or just because they hate me, often times its just people who simply just dont like how i look and how good i am at many things, no other reason than that, and thats not anything i can control… I didnt ask to be here just like everyone else, im doing the best i can, im sorry i cause such upheaval in people that it forces them to such drastic and extreme measures in trying to quell and satisfy their inner troubles that make me such a problem for them…

            Why i attract people on pokerstars is anyones guess, theres no reason for it, all i was saying is that is what happens thats all, its highlighting the severity of the situation i am dealing with, thats all…

            Why would you think im sitting here thinking the world is stalking me?

            Do you have reason to believe im some paranoid person? Some consiracy theorist scared of everyone? I never said the world was stalking me, but i have stalkers, thats a big difference, the former being untrue does not by default make the latter false, as i have stalkers i have fans and supporters, but the stalkers, they got some special something for me, and they obviously have tip top tracking and spying ability, whether through legit operations or black hat hacking, i really cant say for sure, all i know is no matter what i do, no matter what technology i use, it comes right to my screen and in my face and everywhere i go on the net, to the point it makes it near impossible to do anything or generate any business or come up with anything or write or make anything without a bunch of people immediately stealing it etc. etc. Then to get death threats and other threats, in public forums where people are either working or just enjoying their time doing something they like, its just a little bit much…

            I always call them out and i have no problem just going right at them trying to draw them out into the real world so we can just finally get this all over with and settled, but alas, crickets and tumbleweeds, nothing ever happens and no one ever shows up, they either keep at it or else they law low for awhile and then find some other time to jump me…

            So yes of course i do bring some of it upon myself, but it seems oftentimes its only from how i look, what i do, the things i know, how i educate myself and etc. etc. and not because im doing anything wrong or illegal or harmful or violent or anything, im just a simple normal human being trying to enjoy my life and make the best of it i can, no need for the ridiculousness…

            Ive found that no matter what i do and what i say, whether im nice or mean or this or that, it matters not, these people are like robots, they just repeatedly continue the same way all the time no matter what, so obviously im pinned on their board and they have orders or desires to do something, and thats just the way it is…

            One things for certain, i wont be paying anyone about it, to either stop doing it or to protect me from it, as either one could just be extortion for money, which i dont get down with…

            On another note, if i did have the money, which i dont, but if i did, i would certainly pay an entrance fee to a solid core circle of people, like the gold panners back in the day had their little society of people that you invested into and then passed their initiation and then if you hit tough times or something, they would float or cover you, so you could live life as a commoner while having some security, and it was a happy family like that, for sure i see tons of value in things like that in this world, and if i could i would certainly be down to join something like that, so long as it wasnt some criminal organization, which im not out to bring down, im just out to avoid…

          • Anonymous

            “Do you have reason to believe im some paranoid person?”

            Um..yes….

            “but the stalkers, they got some special something for me, and they obviously have tip top tracking and spying ability, whether through legit operations or black hat hacking, i really cant say for sure, all i know is no matter what i do, no matter what technology i use, it comes right to my screen and in my face and everywhere i go on the net, to the point it makes it near impossible to do anything or generate any business or come up with anything or write or make anything without a bunch of people immediately stealing it etc. etc. Then to get death threats and other threats, in public forums where people are either working or just enjoying their time doing something they like, its just a little bit much…”

          • Anonymous

            “Um..yes….”

            You can say that again… 🙂

          • Anonymous

            Paul, it would be nice if you could remove this guy.

            I don’t believe in censorship, and I don’t want to offend this guy, but his comments are just spam…

          • Anonymous

            Paul, it would be nice if you could remove this guy.

            I don’t believe in censorship, and I don’t want to offend this guy, but his comments are just spam…

            Im not spamming and i would appreciate if you stopped with your libelous line of actions…

            Its pretty hard to offend me, id just appreciate you told people the real reason why you and all these other people do and say what you do…

            What i provide is substance where most others dont… Where most others contribute pr campaigns and lies and deceitful agenda filled comments, some hiding behind nda’s etc. i come forth with actual real and honest truths from inside the very industry you all claim to care about, so if its not for any other reason then im a threat or i damage your business, then who knows why yall act as you do…

            Just ignore me, your industry has done a great job of that, with the back-facing and talking about someone when they are in the room but never talking to them, we all know how this all goes, it would be nice if everyone could just be adults and move on with everything…

            I dont use a ip bouncer or tor when posting, he can stop comments from being auto posted and look at the ip address each and every time, so when he wants to he will easily be able to fully censor me… its his house his rules so if thats what he does then that is fine, i just wish you people would just stop already…

            there is no need to engage me, im just a simple normal human being, im no threat to your business or your territory, im not swooning on your girls or taking any piece of your pie, there is zero need to treat me these ways…4

            thanks for your understanding!

        • GGG

          Well yea, that’s why streaming is good, it makes “paid” easier. That was my point. Plus, those piracy problems haven’t existed for like a decade. Early one, sure, but Napster was competing with $15-18 CDs. But enough people started pirating and files were democratize through torrenting that 99.9% of the time you wanted an album at 320kbps you were going to get it. If it was a virus or shitty quality, it’d fall down the ranks fast.

          I’m of the opinion that if Spotify didn’t exist, and if there weren’t a number of other streaming services around/coming up, there would be an illegal streaming site within a year, if not already. YT didn’t pay for how many years, Grooveshark had tons of illegal files when it started, SC probably does. It would just happen. So now, whether it’s paid or free, the ease of streaming anything, even storing locally, outdoes (or will outdo, I think) the ease of torrenting. If you lurk around the music sections of Reddit, it’s already clear that it’s happening.

          Reply
          • Sarah

            Yep, streaming is the way to go for most people.
            It’s just the streaming business model that needs to change.

          • FarePlay

            Sarah, you can’t speak for other generations. And ultimately, fans will do whatever is necessary to get the music they really want. When we arrive at a place that music has become so commodified that the audience doesn’t really care about great music, they just want background Miusic their vine vidos, we’ll know the music business is over.

            My only optimism in this entire train wreck of digital disruption is an intuitive belief that greatness rises above good enough and great determine the future. This has nothing to do with sales, it has to do with great songwriting and brilliant execution. Most of the bands I follow, with the exception of Springsteen, are not platinum artists. And even Springsteen is not Investing or spending the time to make meticulously crafted recordings as he once did. His life is touring, because that’s where the money is. Same with McCartney.

            What me may lose are a handful of great recordings from these vibrant, but aging artists who are tied to the road to make serious money.

          • Sarah

            Did I speak for other generations? I said “streaming is the way to go for most people.” I didn’t say “for everyone” or “for a particular generation.”

          • Sarah

            From Merriam-Webster: “greatest in quantity, extent, or degree”
            So in this case I’m referring to the preferences of consumers responsible for the most amount of digital music consumption. I don’t think membership in this group is strictly defined by generation.

          • FarePlay

            You may want to get a life, instead of being obsessed with trying to be right.

          • Sarah

            Sorry, sarcasm doesn’t translate well over the internets, and you asked a question so I answered.

          • GGG

            Springsteen is a terrible example. He could personally fund his band sitting in a studio for a year straight, make the greatest album ever that not one single person pays for, and still be worth hundreds of millions. He does not NEED to tour. He WANTS to tour. Same with McCartney.

            You need to start following new(er) bands who are still striving to create careers, and then measure your issues/arguments. You can’t use millionaires to back yourself up in struggling artist debates.

          • FarePlay

            GGG, always enjoy your comments, but as we’ve gone down this road before you have a rather nasty habit of taking my comments out of context and parsing the information to fit some preconceived comment you want to make. ( see your comment below )

            “most of the bands I follow……..With the exception of Springsteen…………are not platinum artists.”. Now GGG, I know you can read so WTF??????

            As I’ve stated often, the main point of all of my comments is to reinforce the reality that interactive music streaming is a failure, but that isn’t the important part. The important part is that It is squeezing out revenue from musucians and songwriters. Spotify ain’t gonna save the music business and I know you don’t totally disagree with that.

            “My only optimism in this entire train wreck of digital disruption is an intuitive belief that greatness rises above good enough and great determine the future. This has nothing to do with sales, it has to do with great songwriting and brilliant execution. Most of the bands I follow, with the exception of Springsteen, are not platinum artists. And even Springsteen is not Investing or spending the time to make meticulously crafted recordings as he once did. His life is touring, because that’s where the money is. Same with McCartney.”

          • GGG

            Point taken, though your last sentence made it seem like we’re missing out on a bunch of classic albums from the older artists because they are touring. And really, there’s no way to know that. Your whole studio time argument has SOME merit for sure, but the fact that there are still plenty of fantastic albums coming out sort of shoots that in the foot. Now, most of the ones I’d consider “fantastic albums” aren’t particularly mainstream with a few exceptions, and therefore the audience is far smaller than it was in days past, but they still exist. Plus the myriad other reasons people don’t listen to music the same way, from format to access to other ways to entertain oneself.

            Not to mention, who knows if some album would have been made worse with MORE studio time. Brian Wilson went crazy for this exact thing. Or do you really think people would think less of Metallica if Lars didn’t spend weeks getting the right drum sound (as the legend goes)? When something comes out, it comes out. There’s really no way of knowing what would happen with more time unless a song is literally unfinished. And for every Beatles album you can throw at me as only existing because they had basically infinite studio time, I can acknowledge that but probably throw back an album that took just as long that nobody gives a shit about and/or wasn’t any good.

            TL/DR: I’m not saying you’re wrong. You certainly are not, in theory. I guess my thing is that I think the completely decentralized points of access to music is far more reason there doesn’t seem to be as many universally acclaimed albums these days.

          • Anonymous

            Springsteen is a terrible example. He could personally fund his band sitting in a studio for a year straight, make the greatest album ever that not one single person pays for, and still be worth hundreds of millions. He does not NEED to tour. He WANTS to tour. Same with McCartney.

            You need to start following new(er) bands who are still striving to create careers, and then measure your issues/arguments. You can’t use millionaires to back yourself up in struggling artist debates.

            You may be right, but im not so sure he or Paul really want to tour anymore, i would take a guess that they feel its their duty and they are obligated to, for various reasons…

            I think with Springsteen the important thing to remember with his career, since hes so popular and has such historical relevance now and such massive and incredible value and important to the music industry, that it took him a few albums before he was successful, that without that label to float him and not shelf or cut him after the first weeks poor sales, to stick it out through years and albums, before catching and getting that popular, which is something you do not and will not see anytime soon other then from those who are fortunate enough to be able to self fund…

            You can look at pauls career similarly, they busted their hump for a long time making nothing before finally getting a chance, and even then, a lot of luck was involved, and without some way to cover costs of living and expenditures needed for progression and advancement and just to service their customers by having the gear needed, then money has to come from somewhere to give people the chance to become something, the way it seems set up now, is the best artists wont ever have the chance, unless they are rich or trust funded, simply because the development money and sponsorship is nowhere to be found and few and far between…

            Not only is the world potentially missing out on, but so is the music industry itself possibly missing out on, tons and tons of possible springsteen like figures, simply because with how they run the ships and do the numbers, that they just cant justify taking those sorts of long term risks anymore…

            I think thats a more plausible reason why some of these legacy guys and girls are still doing that, some perhaps for needed money, others possibly because without them the whole thing would straight out tank, and maybe they hope to get back to a point where longer term investments in artists and musicians and performers and entertainers and writers and producers can be made, as its whats best for their industry, themselves, but also just for society, culture and the people of the world…

          • GGG

            Sure, there’s some sense of fan loyalty, but they don’t have to play 3 hour shows if they didn’t want to. They could easily say “Hey, I’m old, I can’t rock out 100% for this long every night anymore” and people would understand. But for those guys, and even people like Phish and DMB to still go an hour+ longer than the vast majority of acts, shows they love it. It’s in their blood. I’ve seen plenty of arena acts that max out between 90 and 120 minutes, young and old.

          • FarePlay

            GGG you’re right Springsteen loves to play, he also has a lot of people dependent on him for a paycheck. The loss in earnings from the cratering of music sales is massive for someone like Springsteen. Including catalogs sales he’s probably lost ten million a year.

            But before we get into he’s rich f. .. him, the money’s going somewhere. It’s like the argument against paying for pre 1972 music. It’s 15% of Pandora’s streams, why should Pandora get a free ride?

    • Versus

      The past is a poor predictor of the future, especially when other variables can change.

      The results could be very different if serious, consistently enforced penalties were applied to both illegal uploaders and downloaders. Make the illegal free option too painful to consider.

      Reply
      • Sarah

        Just to clarify …. are you suggesting a return to suing grandmothers?

        If you’re going the “make the illegal free option too painful to consider,” you should be focusing on the people who benefit commercially from illegal consumption (i.e. services, websites that profit on ads from providing the content, the advertisers who advertise on them). Going after the end consumer is a risky strategy and probably not the best one for achieving your ends.

        Reply
        • Anonymous

          “Just to clarify …. are you suggesting a return to suing grandmothers?”

          Just to clarify — are you a grandmother?

          Or is there any other particular reason why grandmothers should be allowed to steal my property?

          “Going after the end consumer is a risky strategy”

          Nonsense, going after thieves is an essential part of any release strategy today. There are lots of cheap and reliable antipiracy services out there.

          Try:

          toppletrack.com/artists

          nukepiracy.com

          muso.com/anti-piracy/services/music

          Reply
          • JTVDigital

            This was what I was referring to but did no want to write company names to avoid free publicity, but here we go: so far I tested Audiolock and Toppletrack and both were able to scan, detect and de-index a lot of illegal links.

          • Sarah

            Nope, not a grandmother. And no, being a grandmother doesn’t mean you should be able to steal. 🙂

            This is purely a matter of PR, perception, and public opinion. Unfortunately, suing “sympathetic defendants” is a bad move for a company. It works both ways, actually: Walmart, for example, is more likely to settle a case with a kid or sweet old lady plaintiff than with a healthy, active looking 40 year old man as plaintiff.

            No matter how much you want it to be exclusively about right and wrong (“stealing is bad and should be punished even if it’s a little old grandmother”), if you’re in business then the public opinion of you is likely to impact your business performance. Fighting with parties that are perceived by the public as sympathetic may be right morally, but it’s often a bad PR move unfortunately. Going after other businesses or top commercial offenders (like the people running ad-supported pirate sites) is a better move, for both public perception and actual effectiveness.

          • Anonymous

            “Fighting with parties that are perceived by the public as sympathetic may be right morally, but it’s often a bad PR move”

            Total nonsense, Sarah.

            Metallica sold millions of albums and tickets during their fight against Napster — a service that was perceived by the public as incredibly sympathetic.

            Their album St. Anger even debuted at #1 on Billboard less than a year after they destroyed Napster.

            In other words:

            Metallica’s war against pirates was the best PR move, ever!

            Feel free to repeat. 🙂

          • Sarah

            Good point. You’re right. It can work out – though it’s certainly not guaranteed, and it’s a seriously risky PR move. And I think it’s safe to say that artists will always fare better if they’re the face behind it than a company (like a major or RIAA).

            Look, I don’t have any problem with anyone enforcing their proper rights through legal means. I’m probably one of the absolutely strongest proponents of property rights here. My argument is not about what you’re entitled to do – when it comes to your rights to control your property, I’m behind you 1000% – but about the most effective ways of achieving specific goals.

          • Anonymous

            I know we agree on piracy, but I’d still like to point out that most of the ‘resistance’ against Metallica, Kiss, Taylor Swift, Lili Allen and RIAA/SOPA/ACTA came from the same 300 constantly spamming 16-year old shopllifters.

            No other industry would listen to guys like that for a second.

          • Name2

            They did, however, follow sage advice like “Sue grandmothers! Put spyware on peoples’ computers!”

          • Name2

            Or is there any other particular reason why grandmothers should be allowed to steal my property?

            The recurring “suing grandmothers” does not excuse theft. It is a meme resulting from the abuse and incompetence of the music-biz people who are supposed to be our new internet overlords, doling out Internet death penalties, bullying ICANN, and whatnot.

  11. Mr X

    Hey Paul – here’s the real news that has not yet been reported.

    So we all know that contractually Spotify had to meet certain free-to-paid premium conversion milestones, right? Specifically, Spotify had one year to convert 30% of free users to a paid premium plan. Easy right – just get a bunch of time-limited free users and convert them. Simple. At least that’s what Spotify thought. So in Q1 2014, Spotify went on a campaign to bloat the “free tier” by giving away free 30 day premium subscriptions to whoever had an email address and a credit card. As we all know, this is a common marketing ploy hoping enough users either actually convert or forget to cancel and don’t notice the $9.99 on their credit card.

    In Q2 as the initial conversion campaign was not meeting expectations, Spotify met with the labels and pitched the concept of a $4.99 half price plan to lure in their primary demo – the highly coveted college students. Plus, after 4 years, the long-tail would kick in and those discounted subscriptions would mature into a massive full price base, right? Wrong. The problem turned out to be two-fold. First, Spotify’s free version included shuffled playlists on smartphones and full on-demand catalog access on tablets. Paid premium, on the other hand, removed ads, provided higher quality audio, and allowed for offline listening. For most college students, however, these were not big differences that would justify the $4.99 / month. I mean hell – $4.99 is a lot of money to a college kid. They could have bought an extra beer with that money…. Needless to say, the conversion rate fell far short from Spotify’s and the label’s projections. To make matters worse, the college promotion brought in even more college students… wait that’s good, right? Wrong. The majority of students were on the free tier which further distanced the percentage gap between free and paid premium.
    Now Spotify had a major problem. Their efforts to initially front load free users and discount the college subscription was backfiring because they had this massive free base that was going to make it nearly impossible to convert 30% to paid premium by the end of the year. At this point (Q3), Spotify tried to renegotiate but the labels made it very clear that if Spotify failed to meet its conversion milestones, their license covering the free tier would expire.

    So the geniuses at Spotify tried to cheat the system at the expense of the labels and artists (surprise – surprise). Spotify determined that their contract with the labels did not set any minimums for the premium tier. At the time, the labels simply never considered that Spotify would actually de-value music so much that they would offer a premium subscription that would have absolutely no chance of being profitable. However, despite reports to the contrary, profits and fair compensation for artists were not technically major considerations at Spotify. Rather, they had to meet a 30% conversion or else the rights to stream to a free tier would expire.

    So, in Q4, as a last ditch effort to meet its conversion goal, Spotify launched its now infamous $0.99 plan for 3 months of premium. The goal was very specific. Set a premium price slightly more than free to get just enough “paid” premium users to meet its conversion goal and live to fight another day.
    Unfortunately, for Spotify (and certain label execs), the labels were onto this pump and dump scam and were pissed off that Spotify’s lawyers had “outsmarted” them. The labels’ top dogs were especially venomous and demanded that heads roll for this contractual oversight that de-values music so greatly and would undoubtedly negatively impact their bottom line (via significantly lower download revenue).

    However, as noted above, the percentage of free to paid was so lopsided, even the $0.99 plan could not convert enough free users to the paid plan.

    Fast forward to the where we are now. Digital execs are getting fired, Spotify free tier is getting cut, and most importantly, the relationship between Spotify and the labels may be irreparably damaged (at least with the current regime).

    There is another piece to this story that involves Spotify’s promises of vast riches after an IPO exit but I’ll save that for another day. Not sure what the future holds but don’t be surprised when the movie comes out because the behind the scenes is high drama.

    Reply
    • Trevor

      Is this true? If so, holy [email protected]! Can any of this be corroborated?

      Reply
      • Rooster

        Yes this story needs some links

        “Don’t believe fairy tales, sermons or stories about money”

        Reply
      • GGG

        I don’t really see what part of this is THAT shocking, or am I missing something? All this info has pretty much been known, and the reasoning/links behind them could be strongly inferred, and sort of has been by Paul/others on here already.

        Reply
        • Rooster

          Yes the timeline and basic facts can be, as you say, inferred.

          However, I didn’t know “Spotify determined that their contract with the labels did not set any minimums for the premium tier”

          Mr. X has seen this contract? are we to believe the labels didn’t negotiate the cost of the premium service prior to making the agreement? Maybe the lawyers negotiating the contracts for the labels are idiots.

          It seems more likely that spotify did not try to “cheat the system” but rather asked permission from labels during contract re-negotiations to try the .99 deal in desperation.

          Reply
          • Mr X

            With regard to your last statement, that was the tipping point. Spotify did not ask permission or consult the labels in anyway. The labels would never have agreed to a $0.99 premium subscription so Spotify proceeded on their own to try to meet the conversion milestone and force another year of the free tier. File this under the axiom “it’s better to beg for forgiveness than to ask permission.”

            As for corroboration, just look at the Agreement’s Exhibit J subsection D entitled “Mobile Free to Paid Conversion Target”.

            Further, in Section E, it defines
            “Mobile Free to Paid Rate” means (X/Y) * 100, where:
            X = the number of members of the Mobile Free Cohort who are Spotify Paid Users in the thirteenth month following launch of free-to-user mobile functionality; and
            Y = the number of members of the Mobile Free Cohort.”

            It’s all there in black and white….

          • Sarah

            Rooster, I think that was Mr X’s way of saying “yes, I’ve seen the contract.” 🙂

            As you can see, Mr X, from Rooster’s comment, most people haven’t seen the contract. Thanks for sharing your info.

            As a lawyer… how on earth did your lawyers let this contract pass without specifying a minimum for the premium tier?

          • Rooster

            “it’s better to beg for forgiveness than to ask permission.”

            I think grooveshark has that trademark. better put a little TM after that

          • so

            Massive, and obvious, difference. Spotify pays, Grooveshark does not.

          • Trevor

            Yes I know the difference {I was being sarcastic}. I’ll include commentary in my next post.

    • Sarah

      Thanks for the detailed comments. Links would be helpful but this is very in line with other information I’ve seen.

      A problem with subscriptions is that subscriptions aren’t attractive to consumers. For every person who is willing to commit to an ongoing subscription, you have many more who are not – even if they are willing to in fact spend the same amount.

      I addressed the problem with subscriptions from an economics/profit maximization perspective in the other thread, “Big Labels are Declaring War on Free Music” …. simply put, if the streaming options are subscription and free, the industry loses money no matter what the subscription price is.

      Mr. X

      There is another piece to this story that involves Spotify’s promises of vast riches after an IPO exit but I’ll save that for another day.

      There are always vast riches…. you just need to wait until the investors and founders cash the hell out. Ignoring the music industry for a second, as a businessperson (with a decent set of morals) it drives me absolutely mad when investors are able to cash out with huge profits by dumping a seriously unprofitable company on the public. I’ll probably cry a little if Spotify succeeds in doing that.

      (Yes, we’re trying to stop them. The only way to do that realistically is with another company that starts showing real promise – numbers that actually work for both consumers and the music industry today, not in a magical future.)

      Reply
      • Versus

        ” if the streaming options are subscription and free, the industry loses money no matter what the subscription price is.”

        I bet the music industry would make money if the “illegal free” option were truly removed.

        Reply
        • Sarah

          Probably. But my way is easier. 🙂

          (Technically, anything that doesn’t require significant political/legislative change is way easier than something that does.)

          Reply
          • Anonymous

            Only problem is you don’t have a way.

            Piracy cut the industry down by 50% since 1999 (and that would be 100% without laws and enforcement).

          • Sarah

            Oh? You’ve already seen our platform and demo? WOW! That’s impressive that you’ve pulled that off without having access to it. 🙂

          • Anonymous

            Huh? You described your service as Pay as you go, and that won’t fly. Or go… 🙂

          • Sarah

            I know that “free” is an important component of industry because of the discovery purpose. After all of our chats, do you honestly believe I’d simply ignore that aspect, or fail to plan and build for it? Surely you know by now that we aren’t about blindly imposing our own preferences but letting other people express and act on theirs – and in doing so, letting the market find an optimal balance.

            Maybe that optimal balance includes a predominant free component. We aren’t opposed to that; we’re opposed to assuming or insisting that it must, without letting the market (artists and consumers) actually sort it out. RepX is all about bringing to life a vision for the music industry that is sustainable and desirable, for both artists and consumers. That means not ignoring important issues or practices. 🙂

            BTW, Mark Mulligan over at music industry blog has done numerous consumer surveys on the issue and PAYG actually has the strongest appeal for consumers in the context of moving from free to paid (Read “It is time to think beyond the monthly subscription”)

  12. jr

    Again i think everyone is missing the big picture.
    This discussion has NEVER been about artists. In fact in the label business it was rarely about the artist. Do I need to send you all looking at the inception of jukeboxes, then the cut outs and other lovely scams? This has and continues to be about music real estate. (Read STIFFED by William Knoedelseder)

    The labels knew the math, only a moron would get that wrong, but the bulk of their money was passive and from catalogs, dumping them on new streaming engines made sense, something is better than nothing. Meanwhile the companies changed into marketing engines not music making engines.

    Now that one streaming thing is being passed over for another, the labels are continuing to position themselves to be in the middle of ANYTHING that comes along. Does anyone think Beats will ever invest back into music? Do you see a lot of diversity in the present pop oriented culture? What on Earth makes you think they ever will go back to speculating on diversity in musical genres when this is a quarterly bonus mentality. Some songs have 15 or sixteen writers, the bulk of the hot 100 was written by four guys. is that what you want your life’s soundtrack to be like?

    The solutions are never going to make sense until the entire business model from music creation all the way to marketing gets worked out and there is no one presently in power that wants to rock that boat. The fields that once grew artists like Dylan, Joni Mitchell, Jeff Buckley and The Stones and allowed Miles Davis and Coltrane to survive have all been paved over as it were and made into parking lots for the executives at the multi-media conglomerates that look to music as a necessity albeit an small and irritating one.

    Reply
    • Sarah

      If you insist on change coming from someone “presently in power,” you’ve stacked the odds against change.
      Change rarely comes from anyone presently in power, because they have the most to gain from avoiding change, and they also have the most to lose.

      Reply
  13. JTVDigital

    souvenirs, souvenirs

    When Morris is asked why the music business didn’t work harder, in the early days of file-sharing, to build its own (legal) online presence, there’s this exchange:

    “There’s no one in the record industry that’s a technologist,” Morris explains. “That’s a misconception writers make all the time, that the record industry missed this. They didn’t. They just didn’t know what to do. It’s like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?”

    Personally, I would hire a vet. But to Morris, even that wasn’t an option. “We didn’t know who to hire,” he says, becoming more agitated. “I wouldn’t be able to recognize a good technology person — anyone with a good bullshit story would have gotten past me.”

    source: http://www.vulture.com/2007/11/universal_music_ceo_doug_morris.html

    Reply
    • Sarah

      Thanks for the link, that’s an important point to remember. It’s also a huge problem for people in startups who aren’t technologists themselves: you need to get someone else to do the technology-end, but if you don’t know what they’re talking about, you have absolutely no way to evaluate if they’re actually any good. The solution is usually to put in the work (including trial and error) to find someone amazing and then get and keep them on your team.

      Reply
  14. Nissl

    Political drama aside, it seems to me that the fundamental issue is that conversion rates from the free tier to the pay tier have simply fallen short of what analysts on both sides hoped for. I’d suggest a compromise like restricting the free tier to radio and a limited catalog of older releases with paygo and genre bundle purchase options for current music. This would allow new customers to continue to demoing the services at lower rates that $9.99.

    Taking the conversation in a different direction, I agree with the Sony chairman that the biggest problem is still free illegal streams on Youtube. Go search for any current top selling artist’s full album and the first page will add up to millions in completely stolen views, when the artists are generally selling several hundred thousand albums at most. This is *after* several waves of major label takedowns of videos with even bigger numbers.

    If I were the industry, I’d consider delaying music video releases on Youtube and putting them out a few weeks earlier on paid services as an additional value add if they can’t be a little more helpful. At the very least searches like “full album” should automatically return legal purchase and subscription options at the top and Vevo-tagged music videos should get a free link to the artist’s most recent legal album next to them.

    Reply
    • Bandit

      Delaying video release won’t have any effect.

      Anyone can still stream entire “albums” (i.e. over 60 minutes uninterrupted stream) from a CD/video that someone has uploaded

      Back to whack a mole

      Reply
      • Nissl

        Just suggesting it as a way to squeeze Youtube to be a little more helpful up front and/or help boost the value of the paid Beats, Youtube, etc. services by comparison.

        I’m still waiting for someone to come up with a solution for completely preventing theft via Youtube that doesn’t involve somewhat impairing core functions of the site, but they could at least be nudging consumers in the right direction by making legal paid album streams the top results in their searches.

        Reply
        • Bandit

          Agreed

          There are literally dozens of different things that Google/YouTube could do to steer people away from infringing material posted on YouTube or links to sites that host infringing content but they won’t do it because 1) the law says they have to do the bare minimum to remain in the safe harbor and 2) their business model is based on selling advertising on content provided for free by users. If a substantial portion of that content happens to be copyright infringement see rule 1

          Reply
      • Versus

        That’s what has to be stopped.
        Isn’t it possible to block YouTube infringing content on UPLOAD via ContentID, before it ever gets to the public?

        Reply
    • Name2

      Sooo… you want free links to buying based on user search?

      Howzabout somebody actually PAY to get links to stores returned top-of-the-pile based on user search?

      Maybe Doug Morris should start opening those emails promising to make his website appear in searches. 🙂

      Reply
      • Anonymous

        Sooo… you want free links to buying based on user search?

        Howzabout somebody actually PAY to get links to stores returned top-of-the-pile based on user search?

        Maybe Doug Morris should start opening those emails promising to make his website appear in searches. 🙂

        Im sure he like the rest of us are quite tired of receiving that solicitation ALL THE TIME…

        if he or i or we wanted to do that, we would do that, by going out and acquiring who we wanted by way of our own due diligence and research…

        You can tell your band of buddies to remove me from all those lists, sorry, i dont lack the information and knowledge about how that business works, i lack the desire to come out of the pocket for something that wont benefit me, therefore further pestering and increasing your sales job on why you think its important, simply wont get me to change my mind thus making your investment of time energy and money to acquire my business, a fruitless effort, thanks for your understanding…

        🙂

        Reply
      • Nissl

        Why do you think it’s unreasonable to ask that Youtube actually do something to push illegal links down the page so they aren’t the top results when somebody searches for an album title, or things like “Taylor Swift full album”? I don’t see why that’s unreasonable. These days if you do a desktop Google search for any artist, it returns lots of links to legal streaming options on the side card, so they obviously have the tech. Music videos are a big chunk of Youtube’s traffic, so if I were in the industry, I’d be asking why (in your solution) I have to pay to de-prioritize links that are illegal in the first place, for traffic that I’m bringing into the site.

        Reply
        • Name2

          Assuming I understand what you mean by “side card” on a Google search, you realize that’s paid advertising, right??????

          Reply
          • Sarah

            You do tend to point out some constructive things, Name2

            also …. “It’s a series of YouTubes!!~!” …. made me 🙂

  15. Paul Resnikoff
    Paul Resnikoff

    This doesn’t quite make sense. Or at least needs some clarification:

    “Free has been way overdone, and the biggest culprit is YouTube, with their links to free sites.”

    Is he talking about uploads of music videos to YouTube, with links to sites that contain downloads of music, ie., unlicensed sites? Or, is he talking about Google results?

    Reply
    • JTVDigital

      Does he know what he’s talking about? Probably not.
      You’re right this part about “links to free sites” is quite smokey.

      Reply
    • Nissl

      I just marked that down as “free videos” and moved on. However, often what you see now on Youtube as a way of escaping content ID is an empty video that tells the user to click on some link in the description to play the illegal video on another site. Maybe that’s what he’s thinking of.

      Based on my exhaustive research of searching for a dozen current pop albums yesterday, it also seems that some Youtube pirates have also moved to making “greatest hits compilations” in the last 6 months as a way of beating the content ID for albums and singles.

      Reply
    • Bandit

      It’s one of those situations where he is really really ignorant or at least unaware of how digital content is distributed

      OR

      he is really, really clever pretending not to understand (unfrozen caveman music biz executive) although I don’t know how playing stupid helps him

      Reply
  16. DeezNizzuhh

    All subscription models should be $3/Monthly or less. Right now Spotify has 15 million paying members. That’s .05% of the entire internet population. You want Pirate Bay’s users? Offer them a model that’s so cheap they cant refuse. Over a 15 year span raise the price. $10 a month out the gate when all this music is floating around for free?? Are you crazy???

    Music is Free! Get that through your thick heads. Nobody’s trying to start back paying at $120 a year. They have Youtube. Pirate Bay! My Inbox! Spotify is lucky they even HAVE paying members at this rate.

    Hell, if you charged a dollar per month, $12 dollars a year you can get 500 million people to sign onto THAT, generating half a billion dollars.

    At $10 a month with 15 mil, that’s $150 mil. Music is not about delivering to the upper crust, it’s about delivering to the common man. That’s where the money is in music. And that’s fair considering there is no material exchange other than bandwith. They have VC’s and Advertisers, NO EXCUSE.

    Reply
    • JTVDigital

      This is roughly the point I was trying to make, with softer wording – thanks for summarizing the real situation.

      That being said, it is completely normal to have a strong opposition and all the “music community” slamming on the brakes to refuse change and face market conditions, since music is (still sometimes) a form of art, therefore a very emotional topic.

      Reply
    • Sarah

      If you charged $1 per month, for $12 per year …. Spotify would make less off the paying users than it does on the free ones. Sorry, not a smart move.

      I’ll post link to Rockonomic’s analysis of the value of a “free” Spotify user (est. around $1.50, so you’d be losing 33% of current revenue from those users). It’s about 15 months old but the numbers are probably still representative from an ad perspective.

      Reply
    • Versus

      The “common man” pays far more than that for a cell phone, and probably for cable TV as well. He can pay $10 a month for music.

      And it isn’t free. It’s taken illicitly. Very different.

      Reply
      • JTVDigital

        True, but “unconsciously” most of the time, there is always a point where you pay a monthly plan for something without really remembering what’s included (internet, TV, phone…).
        People / “the common man” may value TV, cell phone plans, etc but do not value music. There are multiple reasons for this, the biggest one being probably that the music industry completely missed the transition from physical to digital age in the early 2000’s (or a bit earlier in 1998).
        Until very recently the “pirates” were in control of the digital music “market”, until the development of the legal offers was finalized basically.
        This helped to create this perception that “music is free” or “music has no value” amongst the “common man”.
        Add up in the mix some demographic / generational criteria with the Millennials born in the age of “free” entertainment, plus the 2008 economic crisis and the overall impoverishment of the Western countries and you won’t find that many people left ready to pay for anything, especially when it comes to such “futile” things as music.

        The “common man” can probably pay something between 5$ and 10$ a month for music, technically.
        Underlying question is how to make the “common man” pay for something perceived as “free” and “useless”?
        1. prevent any easy access to illegal links / sources
        2. bundle music subscriptions with other plans or products like phones, TV, cars, anything
        3. make the subscription process seemless and “imperceptible”; this is where our friend pictured above may not be totally wrong, with 850 million credit cards, Apple is one click away from a huge base of premium music subscribers, were this “accidental” subscriptions (people never read the small lines) or voluntary ones.
        4. keep on pushing the free / ad-supported audio-only offers by growing the number of users, which will increase CTR and make these services more viable and revenue-generating for all involved parties.

        Number 4 can not be achieved if 1) is not taken care of.
        Number 2 is already done and has been quite successful sometimes.
        Number 3 is what’s coming up next, let’s see how many people the user-experience experts at Apple can convert, that will be interesting.

        Reply
  17. teaj

    Greedy music industry are in denial that their product isn’t desirable anymore. You think I’m going to pay? No, I’ll just youtube everything. Good Luck, hope you don’t have all your eggs in one basket.

    Reply
    • Sarah

      How is it greedy to want to people to pay for something that cost you money to make? Do you work for free?

      You could raise points of price (“you’re overpricing and therefore I won’t pay”) or packaging (“you want me to buy an album when all I want is a single song, so I won’t pay for the album”) or value (“I don’t like it and don’t choose to listen to it, and therefore won’t pay for it”) and those would be legitimate issues.

      But the “I won’t pay for anything just as a rule” position? You say in a single post “your product isn’t desirable” but you’ll choose to consume it on youtube – in other words: “your product isn’t desirable but I choose to actively seek it out and consume it.”

      Frankly, you sound like the greedy, self-entitled one here.

      Reply
    • FarePlay

      Greedy music industry? Perhaps with the artists yes, but songs have been a buck for fifty years, so what’s your beef?

      Now if your pissed off about the cost of concert tickets. Well you can figure that out on your own. Let’s just image if recorded music was still a viable revenue stream; this is pretty simplistic, but concert tixs if they were still seen as a way to sell music would be cheaper and more bands could earn good money on the road.

      The way it is now, you spend $300 to 400 to take someone to a show, you’re not going to have the money to see the guys you pay $60. to see. It’s just like water, it all levels off at some point and you guys have screwed yoursel and your still cheering for the wrong side.

      Reply
    • Versus

      This makes no sense. If you don’t want it, why find it on YouTube?
      Clearly people want music, perhaps more than ever.

      Reply
    • Versus

      There’s nothing greedy about wanting to make income from one’s work. It’s impossible to survive in a capitalist structure without remuneration.

      Reply
  18. Name2

    Darlings, it wasn’t Erik (or Sergey, or Daniel, or Tim) who tried to have each and every musical work reclassified as “works for hire” with special dead-of-night sleight of hand in the right committee: an effort that would have worked if not for some meddling kids.

    Reply
    • GfarePlay

      You’re right. Let’s get everyone in on the action. You,certainly have an acerbic whit for someone with any experience outside the EFF.

      Reply
  19. A-team

    Put a cigar in that mouth and Doug Morris looks like Hannibal from the A-Team!

    Reply
  20. Andrew

    Just thought I’d throw this out there, but contrary to what the title would imply, at no point in this pointless (and for all intents and purposes, repurposed) article did it say anything about Spotify removing their Freemium model. WTF is this shit?

    Reply
  21. superduper

    Would you say that if Spotify eliminates the free model that it would encourage further piracy? The reasoning that I have is that streaming services are worth next to nothing in terms of real value. Like what are you really getting for 10 bucks? I would say not much.

    Reply

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