Not Making Money on Spotify? How X5 Increased Their Streams by 3,400%…

Having heard Johan Lagerlof, the CEO of Stockholm-based digital compilations company X5, speak at an innovation panel at Midem this year, it was no surprise to hear the news that Universal Music Group has formed a partnership with his company.  Launching the new label U5 together, X5 will curate and release more than 50 digital compilation albums a month for artists on UMG’s classical labels Decca and Deutsche Grammophon, as well as jazz labels Verve and Blue Note.

At Midem, Lagerlöf reflected on how artists would complain to him about low payouts on Spotify.

“I say to them, ‘what have you done today to make more revenues from Spotify?’ And they say ‘well, I’m up there, isn’t that enough?'”

X5 set out to prove how compilations affect the number of streams a track gets on Spotify. The company conducted an experiment using 500 classical recordings from its label partner’s catalogue (Lagerlöf wouldn’t confirm which label, but clearly it was UMG), which already existed on original albums featured on Spotify. X5 repackaged the recordings into new compilations that were uploaded onto the music streaming service and included in its Classify app.

“We then tracked how the partner’s original streams performed compared to the compilation streams – which, for a service such as Spotify are almost the same as a playlist – for the exact same recordings,” he explained. “While the non-compilation tracks were streamed 7,000 times in one week, the compilation tracks were streamed a [whopping] 247,000 times.”

That’s an increase of 3,400% – 35 times the streams for the same period.

New figures from UK label body the BPI, officially released next month, confirm the newfound popularity of compilations. Last year the sales of compilation albums were 20.6 million, up from 19.2 million the year before, and they’re currently the fastest growing part of the digital albums market – up from 0.4% of the market in 2006 to 23.5% last year.

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To Lagerlöf, compilations are discovery tools, and he puts the success of his company down to creating a trusted brand that makes it very clear what the music on each album is like.  “We may call an album The Most Serene Piano Music in the World, and that’s exactly what the listener is going to get – and two hours of it,” he explains.

The company develops their own Spotify apps, including the Classify app, which makes it easy to browse according to composers, eras, instruments, themes – even moods, such as dark, fast, happy, relaxing, romantic and sad.

Listeners can also “follow” a compilation inside Classify.  The 50 Greatest Pieces of Classical Music currently has 62,778 followers. To illustrate the importance of making it clear on the album cover what’s inside, Lagerlöf points to Jascha Heifetz Plays Beethoven, an album sporting an old school cover, which has only managed to reach 124 followers.

Lagerlöf says he read about a survey the supermarket chain Tesco conducted to find out why people would go into its stores to look at CDs, even if they ended up buying them online later instead. The answer was that people like to browse. But while shoppers in a store may browse for a few minutes, in the digital space browsing is cut down to seconds, which, he says, means you have to grab their attention right away.

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He does not believe that streaming cannibalises downloads, at least not at the moment, judging from his own experience.  The U5 label was officially launched 19 March in conjunction with its first big catalogue releases: The 50 Greatest Romanic Pieces by Katherine Jenkins, The 50 Greatest Piano Pieces with Lang Lang, and The 50 Greatest Violin Pieces by Joshua Bell. The albums soon reached the number one slot on the iTunes chart in eight countries – and Katherine Jenkins, who previously was relatively unknown in the US achieved the highest place she’s ever had in the country’s iTunes chart.

X5’s (and now U5’s) target audience is largely younger listeners who aren’t that familiar with the genres, says Lagerlöf.  “It’s a way for them get closer to it.”

Considering that Spotify features over 27 million tracks and its catalogue is constantly growing, such discovery guidance will become an increasingly important marketing tool for labels that want to be heard above all the “white noise”.

Image: LS Lam, licensed under Creative Commons (CC by ND 2.0).  

31 Responses

  1. steveh

    247,000 streams at 0.5 us cents per stream is $1235 us dollars.
    Big Fucking Deal!!! One month’s rent in a big city!!!
    For how many weeks did it maintain it 247k count?
    It’s fucking peanuts guys!
    And to get this, according to this Johan wanker, you have to dumb down your music to a degree of dumbness hitherto unknown!!
    This cannot be right – come on!

    • GGG

      Here’s what I don’t get about people like you. Why not take this little victory, and then build upon it. Yes, in the bigger picture we need to do something about pathetic streaming royalties, but you’re literally complaining about a way to get more money. Who cares if it’s .005 cents or $1, it’s irrelevant for this. This is obviously about a method that leads to more streams.

      • steveh

        Please stop referring to “people like me” – I am an individual with my own opinions just like you are an individual with your own opinions.
        We all see these kinds of crappy compilation CDs that are heaviliy TV advertised on crappy cable TV shopping channels. You know the ones to which I refer?
        I do not like those sort of compilations. Do you?
        This Spotify twat is making compilations like that, and bragging about increased streams.
        Now I do not wish to market music like that – it is the height of what we call “dumbing down”.
        This is not what we make music for – and it certainly not what the bands you work with make music for.
        This is corporate bilge of the first order. How can you possibly defend it?

        • GGG

          Because we’re talking about Spotify. The difference between these things and a playlist is barely more than semantics. There are literally 0 CDs involved. If you can take advantage of some ploy to get that many more listens, why they hell wouldn’t you? If someone wants to listen to the entire album, like you and I do, they can. It’s still there. That option is not gone. And if someone wants to hear the single and others like it, like data and a basic understanding of modern music culture show a lot of people do, they can on some compilation, as well. It’s not replacing one with the other.
          Look, I didn’t live through this, but I’d love to go back to a day where everyone bought $20 vinvyl and sat around their record player absorbing every note and every detail of the cover art. And you can certainly market to the niche that’s totally into that. But if you’re complaining about making money in the music business, which we all are, and you flat out refuse a potential method of growing streams simply because you hate the idea consumers don’t want to listen to music like you do, you’re setting yourself up for more failure.

          • steveh

            You really are talking to the wrong person, fella. Please open your mind a bit.
            I don’t want to go back anywhere.
            I fully embrace the digital music revolution.
            I am not a failure.
            I continually seek new and interesting ways to remain viable and ontinue to make decent money.
            But what I do NOT accept is crappy dumbed down muzak style solutions that hype up crappy dumbed down digital services (ie Spotify) that end up earning more but still pathetic amounts of income.
            Now seriously, do any of the bands you manage want to be on compilations like that? I thought indie music was about being cool.
            Maybe I’m wrong – perhaps you are trying to contact UMG to get your acts on one of these compilations. Which one is it? “The 50 Greatest Pieces of Emo”? “50 Serene Jam band Jams”?

          • GGG

            The simple act of compiling songs doesn’t make them dumbed down or muzak. What a stupid assertion. It makes them the exact same songs in the company of other songs. You think Joshua Bell’s classical performances get shittier when they are compiled differently?
            The streaming payout is irrelevant for this discussion because it will always suck until it’s raised or 4 billion people stream your songs. That is a whole other issue.
            So why are you acting like it’s one or the other. I put out record A with 12 songs. It gets streamed 7k times. Ok, whatever.
            Then I get a song or two on the 12 track “Awesome NYC Indie Rock Hits! YEA!” which is streamed 240K times, which means an avg of 20k steams per song. A nice supplemental streaming revenue. Does that really bother you that much? Both things exist. People that want the record will hear the record. People that want a compilation of curated songs from different artists will hear that.

          • steveh

            OMG you just do not read my post properly!
            I am NOT against compilations per se.
            I am against THESE compilations (as descibed above as a way of drumming up Spotify streams) because I think they dumb down and devalue music.
            Our label puts tracks on loads of cool compilations.
            The compilations, described above, are not cool. They are the opposite of cool.
            Do I make myself clear?

          • GGG

            Drumming up streams devalues music? How is any marketing good then. That’s like saying having to put any money/thought into spreading music devalues it because its own brilliant essence should just attract listeners. Marketing the music in a secondary way, aside from the original album output, is just that, a secondary way of getting music out there.
            We’re not talking about turning your artists songs in Kidz Bop. What makes these less cool than your compilations? You think Joshua Bell isn’t cool, or is dumbed down?

          • Visitor

            These is nothing wrong with licensing your music to Kids Bop either. I find that not being a pretenious is helpful for making money in general.

          • R.P.

            It seems like you are just against additional revenue streams in your life. “$1235 us dollars” is more than $0.
            Get your thought pattern straight and stop searching for the ever so elusive “get rich fast” scheme.
            Take those $1,235 “peanuts” and times them by another 7 or 8 revenue streams and now what?
            dummy. smh.
            Some people need to think, period.
            You know, someone once said: never complain without a solution.

    • Visitor

      “And to get this, according to this Johan wanker, you have to dumb down your music to a degree of dumbness hitherto unknown!!”
      Which says a lot. 🙂
      At any rate, I’m not sure why this compilation thing should be specific to Spotify/streaming, and not work for iTunes/selling.
      But perhaps I totally missed the point…

      • Joda

        It doesn’t work for iTunes selling because people tend to browse differently. As opposed to browsing for tracks, wherever they may be on Spotify, you generally browse albums directly with no passive listening on iTunes. This may change with their new streaming service. Who knows.

        Any way it goes all this compilation talk is really a side show. The main point should be that 247k streams has generated no real income and possibly even cannibalized mp3/cd sales.
        Yes, it does do that. Some genres more than others of course.

    • Casey

      I get the impression it is 247k streams per week, which isn’t too bad. If Spotify paid the same as Rhapsody or Deezer, this would be a pretty decent payout.

      • Faza (CM)

        The wording is very clear: “in one week”. Not “per week”. This sounds a lot like cherry-picked data, though I wouldn’t be surprised if compilation tracks outperformed non-compilation ones consistently (not by such a margin, though).
        The other little snag here is whether these numbers apply to all tracks (meaning all the track plays on the compilation amounted to 247k) or is it 247k plays per track (which I have a little trouble believing). The wording seems to imply the former.
        This is important, because the economics of streaming are different for labels and artist. A label gets a share of all tracks played, but the artist only gets a share of the her tracks.
        To see how this works, let’s assume a 50-50 artist-label split. This means that each will get 0.25 cents per play (keeping with the generally accepted average figure of 0.5 cents per play on Spotify – consistent with my own numbers BTW). If we have a 50 track compilation, by 50 different artists, that generates 250k plays with even splits between tracks (all done for ease of calculation), the label gets 250k x $0.0025 = $625, while each artist only gets 5k x $0.0025 = a whopping $12.5. Even assuming that such numbers hold consistently week-on-week, the label is earning around $2500 a month, $32500 a year on the compilation, while each artist is earning $50 a month and $650 a year.
        This is a really bad joke.

        • HansH

          I have to admit you are 100% right about the outcome for the individual artists.
          (And a 50/50 split is a very positive approach.)
          On the other hand, the same goes for compilation CDs/downloads

        • GGG

          The point to take from this article is less about the actual money being made in the present time and the fact that there are ways to bolster streaming revenue.

          • HansH

            I fully agree.
            There are more ways than compilations. For artists a Soundrop room may be a better way to boost streams.

          • Faza (TCM)

            I counter that by saying it’s about nothing but the money.
            Consider that we’re talking about a 3400% boost here. So how does that compare to non-boosted income?
            F’rinstance, we could revise the given number of plays of non-compilation tracks downwards to 5k (for a different set of 50 tracks by 50 artists), with other things being equal. That’s a 5000% boost from non-compilation to compilation. For the non-compilation tracks, the label earns $650 per annum, while each artist earns $13 per annum for the 100 streams of the track he played on.
            That 5000% boost translates into a decent salary for one label employee over the course of the year (and if they do 50 such compilations, it turns into a decent revenue component at $1,625,000) while for the artist it turns from one “are you taking the piss?” number to another. $650 p.a. is no less laughable than $13, when it comes down to it. Frankly speaking, there are more rewarding ways to earn fifty bucks a month (and countless less rewarding ways to earn a damn sight more than that).
            While we’re at it, the difference between streaming and CDs is that the margins are so much higher. The label and artists may end up splitting something like $8 from a compilation CD and the $4 artist share would be spread among maybe 20 songs, given CD-length limitations. Thus, each artist would be earning 20 cents per CD sold. If it sold 250k copies over the course of the year, each artist would’ve made $50,000 – which is enough to live on. The label, on the other hand, would’ve made a cool million from that one compilation (and if they could put out and sell 50 such compilations, they’d earn 50 megabucks – which is how you become a fair sized label).
            Streaming revenue is so far divorced from real-life financial needs, it’s not even funny.

          • GGG

            You’re still missing the point. It’s simply illustrating a method that can potentially raise your streaming revenue, even if it is from shitty to somewhat less shitty. Even if Spotify paid $1 a stream, this idea would still be relevant.
            Everyone is so busy complaining about not making money that they miss plainly laid out examples like this. You and steveh focused on the money aspect, I focused on the “hey, look, a good idea to try to get more streams!”

          • Visitor

            You are right. But the big problem is that few people buy CDs. If you know of ways to boost CD sales speak up now.
            Reality is that your fans are switiching to streaming. So if I were you I would welcome ideas to boost my streams.
            Whining about low rates doesn’t help. You know how these rates are calculated and there is no way a streaming service will ever pay more than about a penny per play.

    • Stick This

      Why does SteveH always have a stick up his butt?

  2. spotify

    spotify needs to increase its monthly rate from $9.99 to $29.99
    And increase its royalties payment from 70% to 80%.
    This will result in better payment to the artists.

    • Casey

      Except they wouldn’t have any subscribers left to pay artists.

  3. matt

    there are so many Spotify clones these days, which is sad

    • Casey

      Spotify clones? Where?

      Spotify is not excatly original. Their interface is copied from itunes, their streaming idea is copied from Rhapsody.

      • Visitor

        Nag, nag, nag. That’s all you do. Come up with an alternative.

        • Casey

          Huh? I use an alternative. It’s called Rhapsody and I am quite happy with it.

  4. JTV Digital

    I have always admired the strategy of X5.
    It proves again that with a good packaging and nicely compiled albums you always sell more, what majors tend to neglect sometimes when it comes to exploiting their back-catalogue.
    Also yes it does work on iTunes as well, people love buying compilations.

    JTV Digital – affordable digital distribution

  5. dangude

    At what point do you stop categorizing compilations?
    Where is my list for Top 50 Greatest Post Punk Prog Rock Instrumental Hits?

  6. JTV Digital

    Fair point.But we must admit these guys at X5 know how to package and sell digital compilations