I’m Warning You, Universal Music Group. Don’t Make This Stupid Mistake…

Guy wagging his finger (at Universal Music Group... and Spotify)

Windowing albums for Spotify’s premium users?  I applaud you, UMG.  Making those albums exclusive to Spotify?  I will burn you, Universal Music Group.

I woke up this morning to some pretty game-changing news.  Universal Music Group and Spotify had finally completed a long-term licensing deal.

Which means a lot of things, including that Spotify’s once-hopeless IPO is back on.  Or at least a distinct possibility again.  Which also means that billions of dollars in loans and investments may actually be recaptured.  Which also means that Spotify doesn’t have to implode into a fiery ball once the boom goes bust.

Hooray!

Spotify’s Billion-Dollar IPO Is Back on Track (Thanks to a Juicy UMG Deal)

But there’s a catch.  Almost two years ago, we first reported that Spotify would be moving towards ‘gated access’ for premium users (basically, only paying customers get access to certain songs).  And that Universal Music Group — the biggest label — was driving the effort.  Now, a short-term, high-royalty deal is being replaced with a longer-term, multi-year, lower-royalty relationship.

That’s right: a ‘deal’ is like ‘we’re just f*&king’ in the dating world.  But a ‘relationship’ is a multi-year thing.  There’s a commitment.  Which means there’s compromise.

And the biggest compromise is that Spotify must now allow UMG artists to gate their content.  According to Spotify CEO Daniel Ek, that means Universal artists can restrict access to their complete albums to paying subscribers only.  Singles will still be accessible to free users from the go.

Which is a great idea!  Why?

Because it rewards the users that are contributing the most to the music industry and its artists.  But it doesn’t completely alienate users that aren’t paying (or, simply can’t pay).

It also doesn’t create a mass exodus towards YouTube, torrents, or some other piracy platform.  You can still listen to your singles, freebie users, and make ad-supported playlists.  And get access to the full album later.

Sure, you can also go to disorganized, unreliable YouTube or SoundCloud and cobble together an album that might get ripped down.  Or — picture this — you can pay $4.95 a month and get clean access forever.

Onward with music industry growth!  But WAIT…

There’s one thing that absolutely, positively cannot happen at this moment.  Because premium-only is one thing.  But premium-only exclusives are a different animal, entirely.  A vicious animal that preys on its young.  And to layer exclusives into this ‘relationship’ would be a grave mistake, UMG.

Why?  Exclusives alienate music fans, cause confusion, and increase piracy.  But they also fail to reward the music industry’s best customers, who are dutifully paying up to $10 a month and reviving your moribund business.  Those paying subscribers are bringing the business back, so why not punish them?

How to Fix Spotify’s Business Model and Save the Music Industry

You’re paying $10 a month for Spotify.  You’re doing everything right.  Yet Beyonce’s latest album isn’t available unless you drop everything, cancel Spotify, and subscribe to Apple Music.  At which point, Spotify gets an exclusive to another artist you love.  It’s maddening, destructive, and brutally punishing.

And that behavior will continue to retard the growth of the streaming music industry.

But the streaming music industry is booming!

No, it’s not ‘booming’ as much as it should be.  There are more than 100 million paying subscribers, but there should (easily) be more than 150 million.  Or, 200 million.  Who knows.

Which is where Universal Music Group comes in.

Apple is selfish.  They only care about Apple (go figure).  But UMG is the biggest label in the world, and benefits from a giant music streaming ecosystem that rewards paying customers while encouraging free users to start paying.  Across ALL services and experiences.

That means free trial Apple Music users going into month 4.  Free-access Spotify users becoming paid subscribers.  Pandora users trying out Plus.  And YouTube users ditching their disorganized playlists for something better.

And it all happens by smart windowing, not by industry-limiting exclusives.

Capiche?

 

18 Responses

  1. Anonymous

    It’s very unlikely that the UMG deal involves exclusives. I think the idea is that during the 2-week window, the albums would only be available on paid subscription services, which means that people with paid subscriptions to Apple Music would get it on day one, along with Spotify. They just want to keep it off the free ad-supported services during the window.

    The real trick for the labels will be keeping the full albums off of user-generated content sites such as Youtube and SoundCloud during the window. Their DMCA-whack-a-mole skills better be up to snuff.

    Reply
  2. Anonymous

    If anything I hope the new deal prevents exclusives on any platform.

    Reply
  3. Remi Swierczek

    UMG music business suicide at full throttle!!!

    Ek’s style streaming and YouTube/VEVO subs and ads can only BUILD $25B THOMB
    for $300B MUSIC ANIMAL LOCKED IN THE STUPPPPPIDDDDITY CAGE!

    Reply
  4. Kevin Brown

    Why is everyone talking about Spotify and 9.99 streaming services as the only route to getting music to fans?
    And why push music fans in to signing up to Spotify just to get their favorite album?
    Why can’t artists and labels digitally release new albums exclusively in an artist branded app? An app can easily be the modern day equivalent to an album. It just requires the right app.
    I’ve already spoken to several labels that see this as a route to go.

    Disclosure: CEO of https://www.gigrev.com

    Reply
      • SpotifyWins

        Paul this is the first time that i agree with you.

        Re: the article, if anything Spotify is the only platform that has stated before that exclusives are bad for the industry, artists and fans. So i guess we are safe there.

        Reply
      • Anonymous

        You know, it’s not a horrible idea, provided that by purchasing an album through an app, a user is provided with DRM-free MP3 or AAC files that can be added to their iTunes or Spotify playlists. You would also want to make sure you’re including some compelling content that a user wouldn’t get otherwise through iTunes, Spotify or a CD purchase. It’s always a good thing to experiment with different distribution strategies.

        Reply
    • Jim

      What I’d like to see is a big music website.

      Let’s incorporate your idea – have the only place the content seen, initially, is through the artist website. But isn’t it kinda costly to develop an app for each and every artist? These acts have a wide variety of webmasters with a variety of skills.

      As I see it, maybe you have bigmusicwebsite.com in charge of these matters, they do the heavy lifting. Bigmusicwebsite.com provides a code for band webmasters to post on their site. The customer / consumer pays, pre pay for a certain amount of use of bigmusicwebsite.com content. Not a subscription model – like a cell phone plan – but like a pay as you go, or prepaid, also like a cell phone.

      When you have a new album, you really want to get as much money from that album as possible in the first couple of weeks. You can hold that album back from streaming for 2 weeks and the 2 weeks you have an exclusive on it, you’re charging who knows what per stream. You could charge a penny per stream, a nickel per stream, a quarter per stream. That stream is protected by the code you got from bigmusicwebsite. You give money to the bigmusicwebsite.com . Perhaps you got a giftcard from bigmusicwebsite.com if you’re a little kid. Or you could just buy points from bigmusicwebsite.com using paypal or a credit card. And the code that the artist uses keeps track of the customers. The only people able to stream that content are those who have active accounts and are logged in and have available balances with bigmusicwebsite.com.

      You could make the code/new album available only on artist website, or build an app?, or you could have the code/new album available on the bigmusicwebsite.com website.

      It’s great and all that new music is being withheld from those spotify users who aren’t paying at all, which means that whoever is listening on spotify is paying at least a tiny bit. But acts should be figuring out ways to get more money that the tiny bits that spotify is giving. Brand new music is worth more than the fraction of a penny that spotify would be paying.

      If a band for the first 24 hours of release wants to charge 25 cents a stream, some people might pay the quarter, others might wait a day when it’s a dime or a nickel. The technology isn’t all that tricky I wouldn’t think. Buy points. Then use a point system. Basically, that’s about it. a phpbb message board can have a complicated banking system in it, and people are given a point when they post a comment. It’s very doable.

      Reply
  5. Anonymous

    To be honest, I find myself on the fence about exclusives. I agree with Paul’s points above in some respects. It doesn’t make sense for fans to subscribe to multiple services just to get access to the one or two albums that might be on one service, but not another. On the other hand, I think there is sort of a mindset that if you subscribe to a $9.99/month premium service, that somehow entitles you to be able to listen to every song in the known universe. I don’t think that should be the case either. I think people should have a $9.99/month subscription, AND be required to purchase a few albums or tracks on iTunes or Amazon MP3, at least if they want to listen to the newest releases on day one. I think the combination of streaming and permanent downloads is the best path to maximize revenue for the industry. Remember, just because there’s more piracy doesn’t necessarily mean you’re making less money. Enough people would purchase permanent downloads legitimately during an exclusive window to make it worthwhile.

    Reply
    • Anon

      This only works if Spotify can integrate your personal library with theirs. Otherwise you have the same issue as pointed above: your music is in different apps all over your phone. Apple and Amazon may have the capabilities to pull this off, but Spotify doesn’t have a download store and Apple and Amazon sure as hell aren’t going to be sharing their user libraries with them. What would be interesting to me is if the labels do end up going down the exclusive release route, maybe they would offer discounted prices to the download stores for the same album.

      Reply
      • Anonymous

        Spotify can integrate your personal library with theirs. I do it all the time with my Tool albums.

        Reply
        • Anonymous

          I think the only time it wouldn’t work is if the tracks had DRM, but I don’t think anyone uses DRM on permanent downloads anymore.

          Reply
    • Jim

      You’re missing options when your only choices are 1) paid downloads and 2) fixed rate all you can eat monthly subscriptions.

      If you want to watch a new video or listen to a new song, you should pay extra for that. You should be able to stream a new song or a new video for a quarter or a nickel. You don’t want to, and it isn’t economically feasible, to make a paypal payment or a credit card payment for a nickel or a quarter. Paypal and credit cards take too much money. But if you have an account that automatically deducts the quarter after you click yes or something, after you made one payment, it would be simple and easy.

      Reply
  6. GGG

    Remember when everyone on here used to yell at me that streaming and Spotify were dying.

    LOL

    Reply
  7. Devin

    Paul, what do you think is the endgame in regards to the popularity of YouTube currently limiting what streaming services can charge, as well as the number of users who are motivated to pay for streaming services? As it stands now, streaming services still have to compete with free (YouTube), and therefore have to offer a compelling, free tier themselves (ie. with all content available) in order to compete.

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      That won’t last forever. Right now, there are 100+ mm paying subscribers. In a few years, 250 mm+ (maybe sooner). If the industry continues to clean up their act and innovate, 500 mm eventually.

      At that stage, free stuff gets shut down. If it’s not legit VEVO or a blast to fans, it’s out. No low-rev music videos on YouTube generating pennies. Even ad-supported Spotify gets the boot.

      At that stage, the industry has billions they didn’t have before. So they hire real enforcement against piracy. And real lobbyists with real money to get things done.

      Reply
  8. J

    Who in their right mind would switch over to anything because tired Beyonce made a new album……

    Reply

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