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Spotify Executive: “Artists Are Obsessed and Hung Up on Unit Sales…”

SXSWsavoca

..from the SXSW panel, Breaking Great Art Requires Breakthrough Thinking.
Austin Convention Center, Thursday, 2 PM (Room 12AB).

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Lars Murray (VP Digital Media at Columbia Records):  One of the big changes here at South-by in the last ten years is how much artists get paid to be here.  It used to be that it was a straight expense.  It used to be the artist would come down here and play the showcase for free, and nobody got paid anything, except for SXSW.

Now, with all the corporate money coming in, you know, I’m ambivalent a lot of times about what it’s done to the overall ecosystem of this festival, however, it’s indisputable that the artists are getting more money to get paid do this promotion than they used to be.  

Moderator Steven Masur (Partner, CDAS Venture Law Group): How much? What do you think Kanye, or Jay-Z, or Coldplay made?

Murray: Uh… I prefer not to think about it [audience laughter].  But, I don’t know, I don’t speculate, but it’s —

Rick Goetz (GM, musicconsultantcom): Another question is where the check came from, because it’s not the label anymore, it’s the sponsor.

Murray: — and it’s also not just Kanye though, it’s also baby bands that are up-and-coming, and again that’s a great development for the artist.  It’s a complicating factor for everybody, but it’s a great development for the artist.  And it’s absolutely brand sponsorship money that’s coming in, that wasn’t available in the past.

Steve Savoca (Head of Music, Spotify): So this feels like the crux of what we’re talking about.  Right, so if an artist is coming down here and gets a seven-figure check for playing SXSW—

Masur: — Seven figures, now we’re getting a little warmer on how much they actually make —

Savoca: — without a doubt.  But why they’re getting hung up and obsessed on unit sales when an artist can get a seven-figure payday for one show…

We’re obsessing over a chart that’s in freefall, we’re obsessing over unit-based sales that are in freefall, and we’re basing success on that measurement when success is if you can come to SXSW and command a seven-figure check, or even a 5-figure check –

Goetz: — but you’re also talking about somebody who’s an established commodity in a system that longer exists —

Savoca:  — If an artist is here getting paid $50,000 to pay for a brand, then they’re selling 3,000 records a week, then I would say they’re successful.

Goetz: No, no… I’m merely suggesting that somebody who is drawing a brand sponsorship is not where the core complaint comes from when people — real or no, I haven’t done the math — say that ‘well, Spotify isn’t paying’, and I’m not going down that rant.

[panel, audience laughter]

I’m not, I’m really not.

Savoca: Ultimately it always goes there.

Goetz: Well.  And you have health insurance and I don’t, so I guess there’s a price.  But, you know  —

[more laughter]

Savoca: Socialized.

Goetz: But at any rate, I think — I’m going to guess that a majority of the people in the audience are not in a place where their original projects commands the value to find a brand sponsor other than maybe an instrument endorsement or a local check-in restaurant.  I just think that’s a profoundly different conversation, and I don’t know that it speaks to the issue of people who are —

Why do we fret about sales?  Because it’s one of the small revenues that are available to anybody who can drag a CD to a show.

Murray:  And also, the revenue off of recorded music scales.  Touring revenue doesn’t scale infinitely.  You have to show up, you’ve got to be there, and if you get it this week you’re not necessarily going to get it next week.

That’s why recorded music is important – and getting paid for it – is important to the artist.

Again, I was very glib about saying that the industry was addicted to those revenues, but it also made possible a lot of art that would not otherwise have been possible at all.  Artists like Steely Dan that never toured throughout the 70s; Pink Floyd barely hit the road at all.  And these were some of the biggest artists in the world, based purely on the recorded sales of music and not having to tour at all.

So there’s something lost artistically when recorded music isn’t monetized.

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Comments (37)
  1. Anonymous

    “Spotify Executive: “Artists Are Obsessed and Hung Up on Unit Sales…””

    Yes. Because unit sales pay our food, rent and instruments.

    Spotify, on the other hand, is not only worthless to artists — it also cannibalizes sales.

    There are only two ways for artists to make money from streaming:

    1) Start a streaming service, or
    2) Buy shares in a major label.


    Reply
    1. tiniws

      This is the argument I hear over and over and over again.

      The fact of the matter is: the industry has changed. This is what we have to deal with today.

      Unit sales aren’t going to pay for your food and rent anymore–and it most likely won’t ever again.

      I’m always astounded how artists and songwriters, who from experience, lean “left” (i.e., progressively) in the political landscape, take such a conservative approach to the progressive changes in the industry. It’s not your fault; and there’s a lot of blame to go around (maybe most on the labels who chose to sue Napster rather than taking an equity stake in the company and controlling the technology), but that’s in the past.

      It’s time to adapt, folks. We’re in a rough patch, undeniably, but buck up, leverage what you have, and move forward.

      Actually, don’t. Keep complaining while I find new and creative ways to make money and focus on new verticals.


      Reply
  2. Anonymous

    You should take a much harder look at streaming service profits.

    I wouldn’t recommend my worst enemy invest in major labels, but they’re making more $ off streaming than artists or the streaming services themselves.


    Reply
    1. Anonymous

      Bottom line:

      Westergren & Ek make hundreds of millions from streaming — artists lose sales.


      Reply
      1. Guile

        Shall we talk about every label exec (or even middle manager or entry level employee that has seen five, six or seven plus figures while the artists they signed/work are now broke?

        I think that will be a much longer list.

        Sidenote, Ek was a self made millionaire well before he even fathomed creating spotify. Westergren started Pandora before the Ipod, let alone Itunes or any digital services were ever even relevant.

        You wanna play the blame game?

        Let’s go. Let’s take it back to who invented the MP3, the groundwork was laid in the 80’s. Maybe we can get John Connor to go back and take him out so we can all go back to buying 18$ cds.


        Reply
        1. Anonymous

          Yes, let’s get back — on topic:

          Artists are ‘hung up’ on unit sales for one reason only:

          They pay our rent.


          Reply
          1. PiratesWinLOL

            Not for much longer.


            Reply
            1. Anonymous

              Hehe, a new prophecy from our local pirate…

              Here’s the one he made about Beyoncé’s new album when it was released:

              “it is just some silly arty-farty project, which very few will care about”

              Six days later, it had sold 1,000,000 copies. :)


              Reply
              1. Anonymous

                …oh, and don’t forget why it sold that much:

                Beyoncé was so obsessed and hung up on unit sales that she boycotted… Spotify! :)


                Reply
              2. PiratesWinLOL

                With 13 million fans on Twitter, 1 million is not impressive at all. If you then compare it to the giants of streaming such as Baauer, which had his song streamed more than 103 million times every week, then it is just pathetic. Buying music is nothing but an eccentric phenomenon, restricted to the older generation. Also, I am not really making predictions. Essentially I am just mentioning the fact which is that CDs and MP3 sales are in freefall, and that streaming is exploding. Young people don’t know anything but streaming now. If I should make an actual prediction, I would give MP3s and CDs five years in the developed world, except in Scandinavia. Around here I will give it 3 years, which would be consistent with the most recent sales figures from IFPI.


                Reply
                1. Anonymous

                  “1 million is not impressive at all”

                  Not to superstars like you.

                  But 1,000,000 album sales in less than a week would satisfy most of us. :)

                  And Beyoncé showed us the way. So let’s see a lot of other huge Spotify boycotts out there! That’s the way to sell units — and unit sales is the way to pay your rent.


                  Reply
  3. TuneHunter

    “We’re obsessing over a chart that’s in freefall, we’re obsessing over unit-based sales that are in freefall, and we’re basing success on that measurement when success is if you can come to SXSW and command a seven-figure check, or even a 5-figure check –”

    With this attitude music industry will never go over 25 billion. (1999 is worth today 56B)
    Selected few (friends of streamers and almost dead labels in cahoots with streamers) will clean up 10B in live performance. Wow! Mr. Savoca you are blinded by science! Discovery Moment Monetization – your only hope – you got Echo Nest, it is a good start.

    Sicilian mafia has better vision how to run business and reward critical suppliers!


    Reply
    1. PiratesWinLOL

      Yeah, the Mafia certainly got a better vision of how to run a business. They know they need to deliver products that people want: Drugs, prostitutes, “protection” and what not. Nobody want obsolete plastic discs or your discovery nonsens.


      Reply
      1. TuneHunter

        Pimp and prostitute in mafia environment makes money.
        Pimp Shazam and all but few select musicians are broke!


        Reply
  4. FarePlay

    Spotify contributes nothing to the future of music. There someone said it.


    Reply
    1. Anonymous

      Correct!

      The labels spent huge fortunes on talent development. And the results could be heard everywhere: New, experimenting music changed the world again and again.

      Spotify and Pandora spend the same on talent development as the Pirate Bay:

      Nothing.

      Don’t get me wrong; I don’t want the labels back. I’m never going to pay anybody 80-90% again. But let’s keep our eyes on the big picture here:

      Spotify and Pandora are absolutely useless for artists.


      Reply
  5. Veteran TalentBuyerPromoter

    Spotify and Pandora were not built for the benefit of the DIY artist – they were built for the benefit of the consumer. They are consumer convenience mechanisms, absolutely no different in the view from the street than FM radio or Sirius. You guys are all barking at the wrong dogs.

    What drives the streaming royalty royalties is based on standards established by legislation… and unless you get government to mandate minimum pricing, (oh wait, they did that) that actually reflects the balance between receivables and payables (we may want to factor that), and the receivables are made transparent to the payee so they can feel like they’re not being cheated …. …. hmmmm …. yeah … no.

    There is no more scarcity in the world of music. In a free market system, scarcity relative to a stable demand drives the price. When I can turn on the internet in my car, when I no longer am constrained by the choices of an individual at the other end of the line picking what I listen to, then scarcity is no longer the balance in the economic picture. So yes, as artists we have become hung up on unit sales … especially when they’re not sales in the true sense of the word.

    I consul local bands on product marketing and sales, among other things. Let’s break down some numbers:

    Based on a 4 pc band + add 2 for business expenses = 6 “persons” to pay x $40,000 a yr = $240,000.00 How you gonna achieve that as a local band?

    Now let’s remember that throughout the past forty years we only had the nightly gig, and if we wanted to do this for a living we had to do 200 shows a year. The same as working a day job. And IF WE GOT LUCKY we got to be a bigger regional act … and for the very very few an act that was invested in by a guy or gal with a record studio and some marketing savvy.

    DIY local bands have rarely if ever had product – and most today don’t have much more than a cd they made that on average are over a year old. Most local DIY bands don’t ever open XCEL and measure their business. And if they don’t measure it they cannot grow it – and manage it – and eventually the frustration sets in and they break up and go form another band, and the cycle continues.

    Today’s local consumer revenue streams are shrinking — I see it nightly in attendance numbers, and cash register receipts.

    When you have 1500 seat spaces in a town that will only be supported by 650 possible attendees at any given time, (1% market demand x 65,000 population) .. and the music you play is unknown, and your brand is unknown … and people don’t know what they don’t know so they can go search for you … Houston – we have a bigger problem than what performance crumbs legislators have provided us from the table of streaming / broadcasting services.

    Most rooms are small — 200 let’s say – give or take 50 people. IN 15 years, I have worked rooms from 100-300 cap, and RARELY have I seen sold out (every seat sold) shows. Today, it’s more likely to see 50 people than 100 people, and the spend per person is less, and the margins on concession items is less than it was even 10 yrs ago, unless all you sell is the brew you make yourself – and that’s also pretty rare, as things go.

    99+% of us here are local DIY types … We are not the 1% … or even the top 20% … and until we are, we will cry that it’s all so unfair.

    Is Spotify unfair? Are they following the laws of the land? Yes? Then they are not the problem. Is Pandora unfair? Are they following the laws of the land? Yes? Then they are not the problem. They are taking advantage of market conditions as they exist – and regardless of how much the “owner” takes from the deal (Tim), it was “his” money that established the business.

    If you don’t like the terms of the contract don’t sign the f*&$king thing … it really does’t get much simpler from where I work.


    Reply
    1. Paul Resnikoff

      I’m sorry, what terms of what contract? In the case of Pandora, you are included whether you like it or not. That’s the law, at least in the US.


      Reply
      1. Anonymous

        Yes, we are forced to work for Pandora.

        And there’s a word for that:

        Slavery.


        Reply
      2. Veteran TalentBuyerPromoter

        any contract. I wasn’t being specific Paul. But, that said, you don’t have to have your music on Pandora … and when you do you enter into a contract.


        Reply
        1. Anonymous

          Compulsory rings any bells?


          Reply
          1. Veteran -+US+MUSIC+INDUSTRY+1970-today

            okay … forgive a bit of ignorance here. As I understand it, if you do not want your music played on any service you have the right as the copyright owner of that recording to not allow it. Am I correct in that?


            Reply
            1. Anonymous

              “As I understand it, if you do not want your music played on any service you have the right as the copyright owner of that recording to not allow it. Am I correct in that?”

              No, you can’t remove your property from services like Pandora and the Pirate Bay.

              The only way (in the case of Pandora) would be to remove your entire catalogue from ASCAP.

              And nobody would do that.


              Reply
              1. Anonymous

                …though it could be argued that you lose more money because of Pandora than you actually get from ASCAP or other PRO’s.


                Reply
              2. Paul Resnikoff

                I’ll take this a step further. I’m not even sure you can guarantee that your music will not appear on Pandora, even if you are not signed to a PRO. At least without some serious effort and maybe even legal representation. If you’re the little guy, you might get stepped on.

                But this applies to all non-interactive broadcasting. I just heard from a band with some pretty good traction, their song was being played non-stop at Panera’s and they weren’t signed to a PRO. My advice? Sign to a PRO right now, and start claiming those plays NOW.


                Reply
                1. Anonymous

                  “I’m not even sure you can guarantee that your music will not appear on Pandora”

                  That makes Pandora a piracy site.


                  Reply
    2. David

      The functioning of any market does indeed depend on ‘standards established by legislation’. Notably the protection of property rights. If the producers and sellers of any commodity were unable to protect their property, and laws against theft were ignored, then their products would soon have no market value and the market would cease to exist.

      That is the situation recorded music has been approaching for the last ten years. Property rights exist in theory, but their protection and enforcement is hopelessly inadequate. (Exhibit A: Grooveshark is still in existence.)

      So we have reached a state where music has little or no market value. People (some people, anyway) are willing to pay for streaming services, but when you pay for streaming services you are paying for convenience of access to music, not for the music itself. The true market value of music in a functioning market (i.e. one where property rights are enforced) would be considerably higher.


      Reply
  6. ja

    I would argue that Spotify is obsessed and hung up on market share and investor capital, so much so that they are unwilling to share it or even discuss sharing it with all the artists and labels on their service (except for the majors, wink wink).


    Reply
  7. SanityRequired

    Until the ProRights organizations (ASCAP, BMI, SESAC, SoundExchange) flex their muscle on behalf of the artists they represent include holding back content until renumeration royalty compensation laws are changed probably as a massive worldwide work stoppage by pulling all licenses the majority of artists will unfortunately starve.


    Reply
  8. mdti

    >>>
    “Artists Are Obsessed and Hung Up on Unit Sales…”
    >>>

    Isn’t someone obsessed in hanging up artists? :-/


    Reply
  9. Willis

    God forbid an artist would want to get paid something.


    Reply
  10. Kleinbourge

    These guys are pathological.


    Reply
  11. Radio DJ/Programmer

    Can we get some clarification on this issue that as an artist I have no control over whether Pandora plays “my” music? I’ve repped several bands over the past decade who a) can’t get on Pandora, and b) don’t want to be on Pandora (the exception really).

    I do not believe, unless convinced by the weight of evidence, that Pandora can arbitrarily play something they have not gained contractual agreement to play.

    That is just as true in broadcast radio. The artist has ultimate decision over whether I play something on the air or not — not that I need their tacit permission, but if they send something in, that agreement is withstanding.

    Are you all saying that Pandora can arbitrarily air content they have not been given tacit permission to play?

    When a label sends a cut to radio, that’s a loan and that work can be recalled by the label (the copyright owner).

    This is how I have understood this issue since 1975.


    Reply
  12. jean

    PANDORA is not Spotify
    I work with a lot of artists and I can tell you that Pandora has not hurt us and in fact has helped considerably because their recommendation engine is really quite good. For many artists getting on radio is hard yet Pandora acts like a type of radio station and as such while listening to your favorite station you occasionally hear something unexpected. The process of getting that new item onto a playlist is made by some crazy algorithm but in many cases you check that artist out. But it is one of the few well done passive discovery platforms out there.

    I have been on the receiving end of that and it beats not getting play anywhere else. Pandora is one of the few systems out there that will put some unknown artist next to a U2 or a Deadmou5 filtered station and the impact is felt.

    I think we need to really understand what is going on and how to best cope with the mechanisms in play.
    The labels are far from dead, they are more powerful than ever but engaged in a different business model than they were 30 years ago. They are now promoting disposable pop stars that can be monetized quickly and across media brands that they or their parent companies control. They are publicly traded companies with obligations to Wall street analysts. The existing label leadership are raping and pillaging and have their exit routes memorized. The executives that will follow in the next ten years will determine the path of regrowth or sterilization.

    I should think you would focus a tad more on deals like between Clear Channel and Warner group.


    Reply
    1. Anonymous

      “For many artists getting on radio is hard yet Pandora acts like a type of radio station”

      1) Pandora is not radio, and
      2) It’s not about ‘getting on radio’ anymore! I get my exposure elsewhere and so do a lot of people today.

      If Pandora and US terrestrial radio don’t want to pay — and they don’t — they can just shut down.


      Reply
  13. Confused!?!

    Maybe I am missing something here….but I can’t help but feel a little confused by the entire ‘streaming’ debate.

    Agreed, there are artists out there that feel having their music available for streaming is a reasonable way to attract new ‘fans’ who may attend gigs and buy their music…that they wouldn’t have received if not for their music being discovered first by the fan on Spotify, Rdio etc….and then there are the artists that disagree with this and see streaming as nothing but negative for their music/career.

    So my question is, at the end of the day, isn’t the decision as to whether their music is to be streamed or not up to the Artist? If this is the case, then what is the the problem?

    Artists that don’t agree with streaming and do not wish to have their music streamed…then don’t! That is their choice and should be respected.
    And for the Artists that DO see streaming as a positive step in creating new Fans….then their decision should be respected also.

    I do see that streaming has upset the way the Music Industry has functioned over the years…but streaming has become the next chapter in the evolution of music. I’m not saying that it won’t go the way of the DoDo….but it makes sense to accept that it is here for now…and be happy that we still have a ‘choice’ as to whether or not we wish to use it.


    Reply
  14. Versus

    No. We are hung up on being paid fairly and honestly, and not having our work devalued by piracy and exploited by “content providers”.


    Reply

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