So what happens if Spotify refuses to change its pricing and payout model? The very real danger is that the Coldplays, Black Keys, and Mac Miller situations start to multiply, leaving Spotify without first-run material - or, without a huge chunk of the music fans want the most. "Why is every stream worth the same as every other stream?" questioned INgrooves CEO Robb McDaniels in a recent interview with Topspin's Ian Rogers. "Maybe new releases should be paid a higher royalty, so it doesn't take 100 or 200 streams to equal the value of a download."
McDaniels went on to wonder why Spotify doesn't approach the space more like cable - after all, tiers like HBO and premium sports packages require extra money, and subscribers willingly pay. "Fans will pay for exclusivity and limited-edition content," McDaniels relayed. "It works with your cable bill... I'd pay extra to get access to content from my favorite 20 artists."
Or, in the absence of tiers, why not pay artists more for their more popular content? Spotify has a quick answer for that: they pay labels, not artists. But beyond that oversimplifed retort, it turns that expensive major label licenses only get you so far. As 2011 wound on, major-signed superstars like Coldplay (EMI) and the Black Keys (WMG) took their balls and went home, while others like Mac Mall (UMG) opted for a small, debut week delay. And according to sources, labels often find themselves embarrassed and apologetic for their 'uncooperative' artists.
Meanwhile, more artists, labels, and managers are asking themselves if Spotify's model makes sense for them. "With Mac Miller, we held it back from Spotify for the first week," McDaniels continued. "I think you have an obligation to determine what's in the best interests of each artist in each release. And if you have a chance at a number one record, like we did, it behooves you think about when to release that out to the streaming services."
McDaniels seemed optimistic that total streaming ubiquity could bring more money into the pot, but artists are dealing with payout issues in the present. And Rogers himself broke down the fundamental compensation dilemna for artists like the Black Keys. "I question if on average the listener-to-listens count ever reaches 200 streams, and if it doesn't, you have a fundamental loss in value on the music overall," Rogers described, while making a top-level, 200-1 download comparison. "Unless you get more people listening."
/paul. Written while listening to Nitty.
Comments Closed
One more thing Thursday, December 22, 2011
One thing that I've yet to see mentioned in any debate about Spotify and other streaming services is that the per stream fees paid out are not necessarily just for full streams. Right holders, thus artists, are getting accounted to for partial streams that get skipped as soon as the user decides they don't want to listen (subject to a minimum length set in the distribution agreement). So a lot of the money flowing from the services does not even relate to full plays.
gaetano Thursday, December 22, 2011
The ball is really in their court, though I will guess that they're not going to change much when it comes to their rates, whether it be what or how they charge for the service, I don't know if they can afford to at this stage of the game.
They're trying to make themselves ubiquitous, and beyond reproach first...not exactly sure how that is going overall, though they've had a nice push with active users as of late.
If that doesn't work, then they'll have to start chipping away in other places.
I like what McDaniels said about the subjectivity of it by artist, it's interesting though, because I'm sure there were a lot of artists that just woke up one day and their catalogs were up and being streamed whether they liked it or not.
Some people have the leverage to get a take down, or not have it even offered in the first place, but for those who don't (and don't own all the rights to their work, like many artist who sign pretty standard deals) that's just gotta be frustrating.
NathanJE Thursday, December 22, 2011
If I'm Daniel Ek I'm trying to re-do this entire model from licensing to premium price points. First thing is you need to resturcture ALL major label deals for surivival b/c this will not survive at the current rates. Which, heck, maybe the labels already knew this.
2mauce Wednesday, January 04, 2012
They did already know this. That's why majors got equity in Spotify.
CraigDiPaolo Friday, December 23, 2011
Hey everyone, you realize this guy (Ingrooves) basically is UMG right?
So what's the UMG party line because I can swear Rob Wells was just saying something differnt.
Reality check: Friday, December 23, 2011
It is plain stupid to address all the musicians in the world in the same way. They are different personalities, they are different artists, they make different kind of music.
The IT companies don't give a shit about this, of course. Why would they? They don't even care to address the fact that not all programmers or engineers are the same. "Oh, you are a sysadmin? So you are like this and that"...
steveh Friday, December 23, 2011
Robb Mcdaniels says:- "I question if on average the listener-to-listens count ever reaches 200 streams, and if it doesn't, you have a fundamental loss in value on the music overall"
You're a bit late here Robb! People have been raising this question for at least the last three years!
Of course the "listener-to-listens" count rarely reaches 200! The grand average, bearing in mind that a lot of times a person only streams a track once, is more like 10.
If it ever reaches a grand scale, Spotify-style streaming will engender a collossal "fundamental loss in value of music overall". Something that thick-as-shit numbskulls like Rob Wells have never even begun to understand - they never learnt arithmetic at school....
gaetano Friday, December 23, 2011
Finally.
Spotify and it's partners are/were banking on nobody realizing this.
In some ways, this is a hail mary pass into the endzone to cash in on whatever's left of catalogs they have control over, and even more valuable INSTANT trend/marketing data from the backend of the system when it comes to what is being put out now.
What will be interesting is when they don't scale, and they either have to raise prices a la netflix, or start to lose even more content....
If Ek and the boys manage to sell or get some sort of IPO and bail out of this before then, they will be guzzling Mai Tais on the beach with Tom from Myspace and laughing...a lot.
Keep your eye on the shot clock.
Evan_Guerin Friday, December 23, 2011
I have a huge problem with everyone's perceived "fundamental value" of music. The market dictates the value of a product not vice versa.
A few examples: Housing, market values were well over their actual value. What happens? The bubble bursts, values decrease back to something more reasonable.
Art, if I were to create a painting and ask $5,000 for it, unless there is a market for my $5,000 painting I would be inncorrect to assume I would sell it at that rate.
Here we are back to music. There is a value to music, it goes so deep into the soul of the listener that it will always be worth something. However, $0.99/track is not that value. The longer you try to maintain this price point the more people will reject paying for music altogether. I'm not saying Spotify's rate is right, but at least they are getting some money for the music, rather than illegal downloads.
gaetano Friday, December 23, 2011
I hear you,
One of the problems we're seeing here (and you see on the floor of the stock market everyday) is that the commodities values are all fluctuating due to speculation...right now, with the "standard" model, you buy it or you don't. That gamble is perfectly ok for some, not as great as the good ol days, but it works out in the end for the most part.
What's happening here is that the "Market" we're talking about is all just spotify users, paying or ad based. Then there's how many times they play the tunes.
My beef is that unlike the ticker on the stock market, only spotify (and maybe a few distributors) knows how all these variables work together and how this fluctuates (and they'rebeing cagey about what "scale" actually could be). I want to know who's getting paid what, how and when the new users come in, and how the pie is cut throughout.
The whole thing appears to be volatile by nature...as far as what I can see from what we're fed info wise.
When you sign to a label, it's very clear what your cut will be when you sell something. It's very clear even to an DIY artist going through tunecore what their cut will be when you sell something. To me, without understanding the inside of this thing, these values are just arbitrary numbers that are being thrown out into the world, and could be tipped to add more juice to the speculative side of it.
Econ Friday, December 23, 2011
Spotify's rate is actually a lot clearer than radio's. At least with Spotify, 1 play = 1 human being listened to it. In radio, 1 play = no one knows how many human beings listened to it. And radio pays a lot less per "impression" than Spotify.
I have no problem with someone coming up with a "price per stream" music service. Monthly-accumulated micro-payment processes already exist, no reason why someone who wants to can't come up with a service that charges, say, 3 cents for steaming an Eagles track, 2 cents for a Radiohead track, and .05 cents for your crappy music. Compete against Spotify with a service like that and let the pennies fall where they may.
LouisXIV Friday, December 23, 2011
@Econ
Just reading your suggestion with some interest, because a uniform (and transparant and published) per-stream charge and payhout could work, consider that:
(1) most users fit into a predictable level of listening per month (standard deviations probably apply just like ISP usage etc.)
(2) you can build a top-level model around standard deviation levels
(3) then lose money off the biggest, heaviest users
(4) make money on lower users which are most people (gym membership)
gaetano Saturday, December 24, 2011
All good points here,
I had a thought on the concept of aggregate concepts like this, they could potentially be applied to actually collecting revenue from SELLING music.
So, if I'm an artist and I want to sell a song for $.25 and an album for $2.50, the only way I can really do that is through bandcamp, or another direct service, maybe topspin (each will take %15).
The way Spotify is set up, if they let artists set prices, they could effectively collect pennies (or fractions of like they're already dealing with) on the sale of a song or album.
They already have the infrastructure, and the payment devices are in place. In the end, yes, the bubble would burst and the entire value of music would go down (though I'm sure there will be people who would still be selling at premium rates). The new pricing could boost volume of sales.
Devil in the details Wednesday, December 28, 2011
You "forgot" to mention that there are a lot of apps and sites that assist users in grabbing the Spotify stream and bouncing it to individual tracks.
So, at the end of the day, as far as indie artists are concerned, Spotify is a proxy operation to assist piracy.
gaetano Thursday, December 29, 2011
...as I mentioned in another post here.
http://digitalmusicnews.com/permalink/2011/111223startups#fNESFJJKrGuaDV7Muxcg9w
This doesn't isolate indie artists...it effects everyone, obviously artists that see less volume overall will feel it more.
I don't think Spotify cared to think about the capacity for this to happen...or for any of the backlash really. People who pirate music don't want t pay 10$ for access. They want to pay NOTHING for EVERYTHING. Spotify doesn't appeal to them by that rationale alone.
They're offering a great service for the consumer. Once you're hooked, you can easily rationalize that it works for everyone. I mean, even in their ads, they tell you how artists and right's holders get paid, and how they fight piracy. That's all the consumer needs to hear to justify it, being that they want it to be true.
They show no proof of either of these things, they just shout it from a higher mountain, and the people who hear it will believe what they want, as it behooves them.
@psliker Friday, December 23, 2011
This headline infuriates me.
@alligoldberg Friday, December 23, 2011
More for Coldplay? I think you mean less.
Visitor Friday, December 30, 2011
someone would have to pay me to listen to coldplay
@Spartz Saturday, December 24, 2011
meh.
@bdanks Friday, December 23, 2011
Charge more for Coldplay... because?
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