When fans expect music for free, who gets paid?
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Spotify once looked like a savior for the beleaguered recording industry. Today, it’s an obvious target for musicians’ ire.
The music-streaming service, which offers both free and paid memberships, gives Internet users cheap access to millions of songs while also giving artists a way of being paid for their work. Well, in theory. Last week, the musician David Lowery, who is a founder of the bands Camper Van Beethoven and Cracker and has emerged as a leading critic of streaming companies, filed a class-action suit in which he accused Spotify of copyright infringement.
His legal action underscores how the interests of tech firms, struggling artists, and — let's admit it — stingy music fans have become all but irreconcilable in practice. Giving consumers a near-infinite selection of music for next to nothing was a major technological achievement, but it leaves no one in the music business with much room to maneuver.
Based in Sweden, Spotify came to the United States in 2011. Unlike the peer-to-peer networks that allowed free file-sharing in the Napster era, Spotify pays royalties to record labels, which then give a cut to performers and songwriters. But the average rates — about $0.0012 per play — don't add up to much; at that rate, a song with 100,000 plays would generate a total of $120 for everyone involved in producing it. (Spotify's premium users trigger payments of $0.0065 per play, according to a May report released in conjunction with the Berklee College of Music).
Songwriters share in these revenues only when their licensing data are in order. Spotify argues that the information necessary to verify who owns which copyright is often incorrect or incomplete. In his lawsuit, Lowery maintains his songs are being used without his consent.
In the latter version of events, Spotify — whose market valuation asking for forgiveness later, rather than permission first. Far from cutting record labels out of the process, as some artists hoped, Spotify negotiates its royalty payments with those companies.
None of this, however, is helping Spotify make money. Meanwhile, its vulnerabilities are becoming evident. First-week figures of Adele's "25" suggest that a top-tier artist can improve sales of her new album by withholding it from streaming services. (For big stars, the math is always far more forgiving than for quirky characters like Lowery.) The existence of deep-pocketed competitors such as Apple Music limit Spotify's ability to generate more money for royalties by charging more for premium service.
Older music buffs were willing to buy their favorite albums in multiple formats, as LPs gave way to cassettes and then CDs, or to risk $15 on a CD that might have only one or two decent tracks. Consumers who'll enrich Apple by paying $800 for a phone, or Google and Facebook by giving away their personal data for nothing, appear unwilling to spend more than $10 a month on music — or, in many cases, to spend anything at all.
Under these circumstances, Spotify is just caught in the middle of what's becoming the defining dilemma of the Internet era: While Apple, Facebook, and a few other big tech platforms have become constant fixtures in our lives, with the profits to show for it, can anybody else make enough money to survive?