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Spotify CEO: “Artists Will be Making a Decent Living In Just a Few Years”

Spotify CEO Daniel Ek, in an interview yesterday with CNN Money…

danielekCNN

 

CNN Tech Correspondent Laurie Segall: Do you think that one day artists will be able to find a business model, and will really be able to make a living doing what they love and getting their music out there?

Spotify CEO Daniel Ek: I’m 100% sure, and what’s going to happen is the more people that come online, the more people that are listening, it just means that the base of people is going to expand.  And as that happens, even more revenue will come back to the music industry.  So I’m positive that the entire music industry is going to be a lot bigger, and a lot more healthier than its ever been.

CNN: At what point can an artist survive on a Spotify income?

Ek: Well, I mean, the interesting thing here is that we’re just in its infancy when it comes to streaming.  And we just last week had an artist announcement where we basically said if there would be 40 million subscribers paying for a service like Spotify, it would be more than anything else in the entire music industry, including iTunes.

And we’re not too far away from that number, which is the interesting thing.  So, I’m absolutely sure that artists will make a decent living, and actually the industry will be larger than it’s ever been, in the next few years.

 (full interview, here)

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Comments (54)
  1. Anonymous

    He’s right.


    Reply
    1. visitor

      the only way what he says can be true is if Spotify raises it’s royalty rates significantly – or – streaming dies off allowing artists more profitable revenue streams…

      Early year end numbers are in, and it’s not good for Spotify because who wants to trade transactional dollars, the streaming fractions of a penny…

      As Music Downloads Decline, Expect More Anti-Spotify Anxiety
      http://www.fastcolabs.com/3023581/as-music-downloads-decline-expect-more-anti-spotify-anxiety


      Reply
      1. TuneHunter

        He is correct, but it will not be his “proven business model”.
        I wish him well as Pandora / personal jukebox style operation.

        Shazams and Echo Nests have to convert to mandatory monetization and earn real money for all.
        Music has to be taken from the streets. Sooner the better!


        Reply
        1. lady miss kier

          I agree with Tunehunter…if the technology that makes Shazam possible were to join forces with a musician union …we could imagine from there a fair way to collect the songs that are genuinely played in restaurants , free radio and paid radio , clubs, tv, and every establishment where music is played in public . the money collected from these establishments would also help pay in part for music played on the streets …much like an ASCAP, BMI , collects etc….

          it’s a matter of time before some brilliant programer uses this technology to design an apparatus which continueally shazam’s and therfor records what the world is listening to…..although the file downloads remain free….


          Reply
          1. hippydog

            Great..

            now tunehunter is using a pseudonym..
            Too bad the translator is not any better at grammar..

            ;-)


            Reply
            1. TuneHunter

              It might be Cornell student who printed the speakers.


              Reply
      2. Me

        Spotify rates will rise when there are more active subscribers/listeners. The rate is based on the total amount of streams each month. The more people stream, the more money there is for artists. If you kill off streaming, there is no money for artists.


        Reply
        1. TuneHunter

          Delivery method, YES, it is the best and will not go away.

          Streaming with all discovery services as a part of the deal is a CANCER devastating the industry and preventing implementation of alternate monetization.


          Reply
    2. Anonymous

      “He’s right”

      Yes.

      Because Spotify will be dead in just a few years.


      Reply
  2. G.D.

    Spotify royalties are already surpassing iTunes sales for many artists. Ek is not blowing smoke here at all.


    Reply
    1. TuneHunter

      You are to optimistic.
      500 million subs = max 36 billion dollar industry.
      500 will never happen!
      Conclusion: “wrong business model”


      Reply
    1. TuneHunter

      Mathematic of his great goal and brilliant future: 40 x $6 x12 = 2.9 billion!

      Yes, he will be bigger than dwarfed music part of iTunes but net result of 40M subs will be max 18B dollar industry – exactly 30% of inflation adjusted 1999.
      We must remember that his business model is also shrinking the Radio.


      Reply
  3. Anonymous

    Clowns. Guess they haven’t heard of Arena.com.


    Reply
  4. Yves Villeneuve

    Read between the lines, doesn’t take a savvy businessman:

    “And we just last week had an artist announcement where we basically said if there would be 40 million subscribers paying for a service like Spotify, it would be more than anything else in the entire music industry, including iTunes.
    And we’re not too far away from that number, which is the interesting thing. So, I’m absolutely sure that artists will make a decent living, and actually the industry will be larger than it’s ever been, in the next few years.”

    Reality: near target of 40 million subscribers yet decent artist compensation nowhere in sight.

    If Spotify offers a transparent fixed .012 per stream, free and paid subscriptions, then I’ll happily provide them my catalog. Granted it’s a premium rate, but includes the additional price of easy access to my music without paying upfront. A case may be made for Internet radio stream rates to be doubled using this logic too. I’m guessing SoundExchange is taking this approach in the next Copyright Royalty Board hearings.


    Reply
    1. Visitor

      Fixed rate is suicide. Ek is not that stupid.


      Reply
    2. TuneHunter

      $.012 is hopeless too!

      As long as he has “harvesting services” free of charge as a part of the deal it WILL NOT WORK!

      Echo Nest will squeeze all the best, including your best work in a moment!

      Once a year subscription for a month is enough to scan and download industry’s best work.
      Free Pandora with free Shazam/MP3 will do the same.

      Then as you live and listen to anything Shazam with auto/MP3 converter will keep you current for free!

      It all goes back to DISCOVERY, if you get tune info without auto purchase that tune and the revenue is gone.
      Those services have to be taken from community work for freeloaders into employment for themselves.

      If this will happen guy like Paul can become a music store!
      He can have tune of the day, week, or tune of the month icons next to the search bar above.
      His choice of unmarked 90s samples of great music – Shazam would deliver them to you for 39 cents
      9 cents to Shazam 9 to Paul and lucky 21 to owners – whoever they are.

      Paul, with his traffic and Echo Nest supported tune discovery would make more cash than he is making today. Just imagine if same “tune of the day” icon would show up on Google bar next to Maps ….and Amazon and Yahoo …and all mega blogs Nice but impossible. Shazams want to be FREE TO ALL !

      Radio of any kind is convertible instantly to music store as long as we contain FREE DISCOVERY.

      We do have 100B dollars of music and all the tools to get it.


      Reply
  5. George Johnson

    If you consider poverty a living wage while he’s worth $300 million living off the backs of real songwriters. Daniel Ek is a looter and Spotify should be shut down for massive copyright infringement. Just because Ek uses a computer instead of a gun to steal your songs, like a burglar in your home, doesn’t make him any less of a thief.


    Reply
    1. TuneHunter

      Totally agree – it is far better than original Napster.
      Than YouTube-Veevoo is more destructive than Spoofy!

      All of it with blessing and childish excitement at Universal with Sony on the leash and Warner stray dog behind.

      Music cash is in Discovery Moment Monetization – 100+ billion annually. Lets grab it!


      Reply
    2. Casey

      Just because he owns a piece of the company he built, he is a criminal?

      No one has to put their music on Spotify. That is their decision.


      Reply
      1. cjhoffmn

        Well sort of, but not in reality. Spotify is benefiting from a series of contracts signed by musicians before the advent of this distribution channel because the labels controlled the decision of where to play the music. Spotify negotiated with them, and many artists had no choice but to go along. Some of the larger acts had power over their labels, but most simply didn’t have a choice.

        This is what some of the current debate is also about – realigning those distribution contracts to that artists have a choice about matters like that.

        Ultimately, this is good because artists are becoming more aware of these issues and negotiating differently – or at least understanding that they are giving up rights.

        So it’s not quite this simple. Many artists do have to have their music up there… For now…


        Reply
  6. FarePlay

    It is unfortunate that Spotify has chosen a business model that has the potential to seriously erode or possibly eliminate the sale of recorded music. There is simply no way that streaming revenue will ever come close to replacing the revenue from paid downloads and the sale of physical product, even with the highly unrealistic paid subscription projections Spotify so freely throws around.

    Those on the other side of this conversation have exhausted their arguments in defense of “unlimited streaming” and the musicians themselves are finally understanding and speaking out about the need to sell music for their survival.

    While there are exceptions; a small number of musicians who have found a way to succeed without a significant revenue stream from music sales, they are the exception, not a healthy evolution. As always, I am puzzled by the strident defense of an industry and not the individuals who actually create the art.

    Had I grown up in the Napster age and witnessed the music industry show their dark side, I might very well have a different perspective, but I didn’t. I grew up in the sixties when the artists were the “innovators” and the “revolutionaries” not the technology.

    While there will never be another time for music like the sixties, something is seriously broken here.


    Reply
  7. Anonymous

    Meahwhile, Spotify loses money and artists by the hour…


    Reply
    1. Casey

      They are gaining artists/songs far more quickly than they are losing them.


      Reply
      1. PiratesWinLOL

        Indeed. There is hardly anyone left, who still reject them.


        Reply
        1. Anonymous

          You’re so right, who would want to boycott Spotify after Beyoncé… :)


          Reply
    2. cjhoffmn

      Interestingly enough – I think that adding artists to the platform is problematic. I haven’t run the exact math yet, however:
      Their formula is: Revs x .7 x (your streams / total streams).
      As they add artists to the platform – it would seem likely that the Total Streams will increase (because there’s simply more supply), but new artists may not have an effect on your streams (might even be negative – but let’s say it stays the same for the moment.)

      Given that one new act is likely to increase the total streams far in excess of one new stream, that means new artists are dilutive to the artists on the system. As more artists come on, ALL artists will regress toward the average and it will likely lower the average payout to all participants in the system. Unless the new artists coming onto the system ADD more new paying members to the system that also listen to the streams of the old artists on the platform, it will create a cycle where the new artists coming on will gain, but the old artists will lose.

      That’s just because of the math.

      Revs x .7 x (your streams / total streams) will be less than Revs x . 7 x (your streams / Total Streams with new artists) unless Revs increase in an amount equal to the new streams.

      Even easier to get if we take a different stand point – that total streams won’t increase for a new artist – in other words, an existing act loses streams in favor of the new act. Revs x .7 x (your streams reduced for new artist / Total Streams) decreases payouts across the system for everyone.

      The only scenario where it is accretive is the scenario where revenues increase one dollar for every new stream create, or for every shifted play.

      My guess is that at this point, revenues of Spotify are relatively independent of new acts signing up. If they get a new act that adds 150,000 new streams, I doubt that will add $150,000 of new revenues for them. Certainly as they are growing it is possible that a new act increases revs like that, but a some point that will disconnect – and new artists will be coming on without a corresponding increase in revenues.

      So it all becomes about getting more subscribers to the system. Given that the subscribers have an option – to get the music for free in exchange for listening to ads on the system, I still think their assumption of getting to 40mm paying subs remains incredibly aggressive.


      Reply
      1. cjhoffmn

        Yes, that’s right! But that model massively decreases the value of the other ways to make $$. That’s the issue.


        Reply
        1. TuneHunter

          The model not only massively decreasing other monetization, it actually prevents many simple opportunities to rescue the industry.
          Streaming and YouTube/Vevo operations are acts total desperation and luck of creativity!
          Sorry to say it but It is almost suicidal activity!


          Reply
      2. cjhoffmn

        I answered while I was running out for a meeting…
        This should say:
        “Revs x .7 x (your streams / total streams) will be MORE than Revs x . 7 x (your streams / Total Streams with new artists) unless Revs increase in an amount equal to the new streams.”

        and – sorry the reply above was meant for MusicCoopLabs’ reply


        Reply
      3. David

        Yes, adding more artists to the service without increasing the number of users is likely to dilute the payout per artist, including existing artists on the service.

        But the assumption behind Spotify’s strategy is that the better and more comprehensive the service, the more people will subscribe. The theory is that ultimately there will be more revenue going into streaming services than was going into CD and download purchases before. Since most people don’t spend much money on recorded music at present, and never have done, the theory is not absurd. But I don’t see how Spotify can achieve it without much higher paid subscription numbers.


        Reply
        1. cjhoffmn

          Right – I agree. Casey was arguing that they were adding acts now, and I’m just pointing out, that its not necessarily a good thing… I’m arguing that adding new artists now, probably won’t cause many more users to join – its likely that its now independent of new artists. As they add acts, it dilutes the existing acts.

          Meaning, now its purely a game of adding new subscribers for them to increase revenues. Given that potential subs have two options: (i) Free with ads or (ii) Pay for no ads, I suspect they will never come anywhere near enough subscribers who become paying subscribers, especially while musicians continue to allow supply of inventory to the idea, other competitors (which seem to be popping up a great deal) will make it even harder to get paying subs.

          I am actually a proponent of streaming, and I like the subscription model. I don’t think the general idea is absurd either, I just don’t think it can work in its current forms. I think Spot and Pand will both change before they stabilize. One of my potential solutions to this that I’m toying with is the creation of a “Streaming Format” much like the creation of the “Radio Format” a bunch of years back. Maybe there’s a shortened format that we should all make available for free streaming, and then a longer full version for paid streaming, for example…


          Reply
  8. MusicCoopLabs

    An artist can´t live off Spotify revenues ALONE. There are multiple revenues, like it´s always been.


    Reply
  9. Danwriter

    “I’m 100% sure, and what’s going to happen is the more people that come online, the more people that are listening, it just means that the base of people is going to expand. And as that happens, even more revenue will come back to the music industry.”

    Replace “music” with “real estate” and suddenly it’s 2005 again.


    Reply
    1. FarePlay

      So you’re 100% sure.


      Reply
  10. Casey

    I don’t see how eliminating listening hour caps in most countries on the free service is going to help get Spotify to their goal of 40 million paying subscribers.


    Reply
    1. FarePlay

      Do you have any idea how difficult it is to charge for something that has been given away for free for so long? Can you understand the damage that music sales have suffered in an economic environment saturated by free music? Can you appreciate that with the overload of music, much of it uninspired and boring how difficult it becomes for true undiscovered talent to be heard and build a following?

      Can you imagine the challenges we have ahead of us to unadapt and create a positive financial environment for working artists worthy of a career?

      Happy Holidays.


      Reply
      1. Casey

        I don’t agree with the decisions Spotify has been making. I see their decision to embrace free as strongly as they have as an attempt to utterly crush their competition while willingly throwing artists under the bus to accomplish their goal. They argue it is all being done to increase subscriptions, meanwhile they begin phasing out Spotify Unlimited and give people less incentive than ever to subscribe to Premium. Whatever their plan truly is, it is clearly a long term goal and any immediate side-effects are just part of doing business.


        Reply
  11. Jeff Robinson

    Biggest problem with his comments is his use of “I think”.

    Not the strongest statement as he attempts to say something that presages the future of the industry.


    Reply
    1. Anonymous

      “This bald swede is public enemy number one for musicians, period, end of story.”

      No, here’s the official list:

      1) Pirate Bay.
      2) Google.
      3) Spotify.

      “That he’s holding a guitar makes me vomit.”

      Yes, it’s gross. :(


      Reply
      1. steveh

        Yes but Pirate Bay and Google don’t have a smirking bald asshole as their figurehead. There is just something about Ek that firmly places him in the number one spot.


        Reply
  12. Maugarz

    This whole streaming thing has to come to an end very soon, it just takes Record Labels and Artists together to bring the whole thing down.
    Streaming Its like if Expedia would sell you a ticket online to flight all you want for a month just for 100 dlls. Subscription. It takes lots of money and time to make a single song how pigs like this want to give it away for .012 cents. Its impossible its wrong.
    itunes model is the future and its the right way to go still they would need to implement hi quality audio downloads.
    People should have the right to listen to the music the pay for. but this streaming thing its made just to make pigs like this richer.
    The day Labels/artists realize the money they are loosing letting this kind of pigs get richer this is gonna change for good. And that day its coming soon. Believe it or not.


    Reply
    1. Casey

      There is nothing wrong with the concept of streaming. The problem is the rate artists are receiving. If every on-demand service would simply pay a rate of ~$0.01 per play, there wouldn’t be much of an issue.


      Reply
      1. Maugarz

        There is ALL wrong with the concept of streaming. Thats the problem that no body seems to see it. We all Would love a subscription service to American Airlines or Delta Airlines where you could flight all you want for $100 dlls a month? But It is impossible. Its the same with music. Music cant stay like an all you can eat buffet forever. You will see.


        Reply
        1. Casey

          Except your comparisons are nothing alike. The more people fly, the more airlines expenses go up. The more people stream music, artist’s expenses are unchanged.

          Furthermore, the average revenue per person subscribing to a music service at $120 per year is higher than the revenue made per person buying music. Even if the person streaming music never buys another song, which we know is statistically incorrect.


          Reply
          1. Maugarz

            Getting a song ready so people can actually listen to it cost money, not 1 dlls not 2 dlls cost thousand of dollars that’s why you expect many people paying for it. Unlimited Streaming for a small flat fee it’s wrong and it just makes the owners of the service extremely wealthy. 120 dlls should get you the rigth to own 120 songs so you can listen to them all the time you want but not more than that.


            Reply
    2. Anonymous

      “The day Labels/artists realize the money they are loosing letting this kind of pigs get richer this is gonna change for good. And that day its coming soon.”

      It’s already happening…


      Reply
    3. cjhoffmn

      I agree with Casey – I think if it is priced right, then it can certainly work – but the change over from the model has been extremely difficult because of the speed at which its been happening, and the fact that the old model fell prey to Napster / File sharing (and that they were really incorrect to try to hold on to an old way of doing business to which consumers were clearly rejecting). Through all of that, the players weren’t able to test pricing and find a model that worked. It was just jammed on them because of the forces they were competing with and again, they were not particularly quick to adapt.

      I spent a short time working on an M&A assignment in the tech-advertising world. Sadly, I do feel like the music industry is getting used here because I think the end goal is simply to build as large of a marketing network as possible, and the adv marketing literally dwarfs the music industry. Yes, Pand and Spot both have a subscription model, but I think Wall Street will assume that the Advertising/free model will be bigger than the subscription model. I think Radio revs last year were ~$16 billion in the US alone. I could see someone at Spott saying “We can own a big chunk of that because we’re a better advertising channel than radio…” . That’s likely how they will be tracked, valued, and compensated by wall street and big investors.

      They really will not have an incentive to care for the music they are putting out, for the artists producing it, or for the level of interest from the fans. I think its more likely that they feel like they are in a race for the largest number of eye balls that they can resell to advertisers, not the largest number of people willing to show their value of music by buying it at a price. There was a clear channel quote in a book I read recently, where a music label exec and a Clear Channel exec got into a board room debate about choosing the albums and artists to be played, and the Clear Channel exec said something to the effect: “If our statistics tell us that its sports talk that will gain the most advertising dollars, then the radio station will play sports talk. We’re in the advertising business making sure our advertisers get a big audience, not the make sure an artist can eat business.”

      That’s what troubles me about the global streaming access model with an ad supported free version of the very same product right next to it. I just don’t think enough people will opt in to paying, and I don’t think the ad supported model is good for music.


      Reply
      1. Maugarz

        I disagree with Casey


        Reply
  13. Anonymous

    Spotify has exclusive streaming rights to Led Zeppelin. Enough said.


    Reply
    1. Maugarz

      Not for long.


      Reply
  14. Visitor

    Baboom = game over Spotify


    Reply
  15. Anonymous

    You can not giveaway todays work for nearly nothing and justify the whole thing with nonsense like “in a few years…blabla” !!! DOWN WITH SPOTIFY! Artists need to know what they re signing up to as well and inform their friend.


    Reply

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