Lady Gaga’s Ex-Manager: ‘It Is Proven That Freemium Works’

Troy Carter: Freemium Is Proven to Work
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Troy Carter is the head of Atom Factory and a top technology investor and music manager.  He currently counts John Legend and Meghan Trainor among his clients, with Lady Gaga and Eve among his former clients.  His current investment portfolio includes Uber, Dropbox, Lyft, Slack, and Spotify.

Emily Chang (Bloomberg Host): You were critical in getting the music industry to embrace Spotify.  How did you do that?

Troy Carter: The difficult part is, the music industry has been through a lot.  We know we hear the horror stories about ‘these guys are litigious’ and you know, ‘they’re dinosaurs’… a lot of the guys who run music labels really get a bad rap.  What the technology industry and some of the press isn’t sensitive to is what Napster did to not just to the industry, but to the families.  I’m watching people lose their jobs, their kids having to be taken out of the schools that they go to.

We’re not like the finance industry or even the tech industry, where you go to college, you get a degree, and you really got something to fall back on.  You don’t go to school to be a record promoter or a concert promoter, so a lot of people like myself — you know, we don’t have formal educations, you know I barely got my GED.

So when Spotify came along, Daniel Ek did a really good job at, ‘okay, you know what? Let me show you guys that I’m a friend, and that I’m gonna add value, and my job is gonna be — show people that it’s easier to pay for and stream music than it is to steal it.  And from there, I became a really big supporter.  Because  one, he’s a guitar player, he’s a musician, and he wasn’t a guy that was trying to steal from artists or anything like that.

Chang: So give me an example where you said to an artist, ‘look, this is something that can benefit you…’

Troy Carter: Freemium Is Proven to Work
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Carter: There have been times where I had to get on the phone with really big managers, and — who have really big clients, and tell them what the downside was for them leaving their product off of Spotify.  All of the music is still available on YouTube for free.  It’s still available on the piracy services for free, so you’re missing out on a big audience and you’re missing out on a revenue stream.

And by the way, you’re ignoring the future.  Hurricane Katrina is coming, you know what I’m saying, and you’re staying in the house right now.

Chang: Have you talked to Taylor Swift?

Carter: No, I didn’t talk to Taylor Swift.

Chang: So, how does Spotify get over its Taylor Swift problem?

Carter: I don’t know if Spotify needs to get over the Taylor Swift problem, as much as it is… people have to see the future.  Because free already exists, it’s a flawed argument when you say ‘I don’t want my music on any service that offers free,’ when free already exists.

Music’s free —

Chang: Is Taylor Swift wrong?  Is she on the wrong side of history?

Carter: I won’t say it’s wrong, but I’ll say in general it’s a flawed argument.  It’s more free than it is paid right now.  [Swift] is an incredible businesswoman, one of the best marketers that I’ve ever seen, and on top of that, incredibly talented.  So, I think she does a lot of things right, but when it comes to this specific argument about, we — it is proven that freemium works.

That if you give people a free option, there’s a huge case study that they become paid users.  But you gotta offer them an entry point.

We’ll see the world become a streaming world, downloads will not last.  Just look at the data right now, it won’t last.


Immediately after this interview was filmed, Spotify agreed to back away from complete freemium.  The Wall Street Journal has now reported that certain artists would be given the ability to restrict content to paying, premium-only subscribers.  The move likely happened under heavy industry pressure.

By the way, this is an utterly fascinating interview, delving into Troy Carter’s difficult, poverty-plagued upbringing in West Philadelphia, his incredible run with Lady Gaga and his ‘accelerator’ emphasis for both artists and startups alike.  Highly-recommended, check it out here.

25 Responses

    • Anonymous

      an “idiot” that made lady gaga a zillion dollars. your point is?

      • todd

        Lady Gaga made him money. She finally got smart and fired him.

        What’s interesting is the question of how many “cheerleaders” for on-demand streaming services are paid? How legal is this? Websites can’t do so.

        • Rick Shaw

          It appears that you don’t understand the relationship between artist and manager, and what each brings to the relationship.

    • LOL... Just Tell Us How Much Equity Does He Have in Spotify...

      Equity can make people say really silly things…

  1. roland

    Troy Carter is a spotify investor and he cheerleads for fremium?

  2. Anonymous

    this guy sounds like a pimp who took it too far, hence why Lady Gaga fired him a week before a major album release. serious drama.

    although he invests in spotify, know nothing about streaming, just pimping.

  3. Paul Resnikoff

    There are a lot of assumptions backed into Carter’s analysis. The assumption that YouTube must remain free is the biggest one: after all, this is a controlled environment subject to copyright oversight, whether that’s the DMCA or YouTube’s somewhat-compliant internal copyright system. This isn’t an amorphous Pirate Bay blob.

  4. Literati X

    Why do you think I’m inside custody trust ; forever entrapped inside the financial syndicate ? You see I’m a schizophrenic and I was roll–surfing around the world wide web pretending I was a music publisher on 40 Wall Street just blowing the caps off motherfuckers , bagging siX billion siX times per day ; that’s how I got my nick name on the international stock markets : ‘ Terror Monster X ‘. . .

    • Phantom Poet Graffito X

      By the way , whose your manager ? And send them out that SXDMG appreciation and love !

      • Spoken X

        Here’s the thing , Eric , is sick and the schizophrenia has taken it’s toll. He’s suggesting that he’s not only a music publisher –:: He’s claiming that he’s some sort of software app developer and has promoted over 250 different application products to the digital convergence universe with the entire music industry inside of it ; the claim is that it was stolen , distributed and published and sold and we’re short one trillion USD on the first payment inside our ledgers. . .

        • Black X

          Those bitch motherfuckin crackers not cashing our checks or paying our bills ; position on , Wall Street , like , Godzilla , one quadrillion deep and send those motherfuckers back to both the stone and ice ages with one sweep of that gigantic , lizard tail I got ! Operation nuclear — desolate is protecting my civil rights !

  5. King Shlomo

    #1 can’t take an advice from someone as conflicted as Troy
    #2 he’s an investor in Spotify
    #3 he’s losing his biggest artists clients bit before they left he pimped their social status to suck up to real investor, he than invested where they invested. Believe me, he’s not picking winner tech companies. He’s a trail follower
    4 his accelerator smashd labs is a joke.
    5 people use YouTube Spotify arguments all the time. He sounds like an irrational puppet
    6. He said something about some music execs get a bad rap. No they don’t. They get what they deserve. They rip off artists and Spotify is a clear example
    7. fuck troy

  6. Ralph

    Paul, are you happy at how uneducated your readers have become? I wonder if reading the comments you start to think it might be more fulfilling if you went back to being a quality news source.

  7. Sean

    Umm.. Troy no longer manages John Legend. Someone didn’t fact check very well. The man can’t keep his clients.

  8. steven corn

    No one here can intelligently comment on why Gaga and Troy split up. It could be for a myriad of reasons. Doesn’t matter especially with regards to his comments about freemium.

    Neither Adele nor Taylor nor Coldplay lose very much by shunning the freemium model. Any study that shows freemium leads to purchases is meant to describe the macro view. These three artists are all exceptions to the rules that govern the rest of the artist on Spotify.

    For the majority of artists on Spotify, it’s not a question of whether streams are cannibalizing download sales. It’s two entirely different pools of consumers. For most artists, if they pulled their content from Spotify, the result would not be increased download sales. It would simply be less exposure and acquisition of potential new fans.

    The freemium model works only if it a) helps increase awareness of your music and/or b) drives fan to financial support (which can be either subscription rev, sales, merch, tix, etc.) For Adele or Taylor, they don’t need either from Spotify. They already have 100% awareness and fans that buy their music.

    So, I would argue that avoiding the freemium has little or no impact to artists of that level. But for everyone else, I would strongly take Troy’s position that you have to place your music where it has the greatest chance of being discovered. Which means, put it everywhere.

    • Jane

      “For the majority of artists on Spotify, it’s not a question of whether streams are cannibalizing download sales”
      -sorry, I’m an artist & a published writer, streams cannibalize sales – end of story.
      Like I’ve said before, streaming amounts to … no impulse to buy. You hear it a few times, you’re over it – no sale.

      • steven corn

        Jane, It’s not an issue of people not buying due to freemium models. It’s more of an issue that people under 25 just don’t think it’s imperative to buy music at all. I recently spoke to a 15 year old daughter of my friend and asked her why she didn’t buy music or subscribe to a service. Her reaction is so typical. She looked at my quizzical and said “why should I pay for music?”

        It’s simply not in their DNA to think that it’s necessary to compensate music creators. They think that music somehow mysteriously is financed and appears. After I confronted her, she said that she would pay for a concert to support an artist. Sadly, she went to no concerts this year because she couldn’t afford it.

        Freemium or not freemium…is not the question.

      • Anonymous

        If my desire to hear a song disappears after a handful of plays, buying it would have been a rip off for me as a consumer because I wouldn’t have gotten value out of the purchase.

        Or should we pay $1.29 for every song we listen to once or twice? That comes out to $0.65 per play – or let’s say you listen 4 times, in which case it’s still $0.32 per play.

        Pushing that position is as foolish as consumers’ claiming that all music should be free. How are presumably intelligent adults so incapable of seeing a balanced position on this subject?

        In any case, the majority of revenue should go to the creators of music that people want to listen to more than a few times. They, by definition, bring the most value to the market and should get the greatest rewards.

  9. Anonymous

    Let’s start by getting rid of “involuntary free”, i.e., pirated works, first.
    Where is the will and enforcement of the law?