In November, Spotify listeners were heartbroken with Taylor Swift’s decision to pull her entire catalogue from Spotify, the world’s largest subscription music streaming service.
Swift stated the primary reason for discontinuing distribution through the streaming service was that she feels Spotify does not pay the artists fairly, also referring to Spotify as a “grand experiment”.
Spotify’s payment system doesn’t pay artists per song stream, persey. Spotify has a complex algorithm in which all rights holders for content get a revenue split based on streaming numbers and Spotify retain 30% from each song. You can read more about that on the Spotify website.
“I tried it and I didn’t like the way it felt” said Swift, “I think there should be an inherent value placed on art. I didn’t see that happening, perception-wise, when I put my music on Spotify”.
On the service, the average song generates between $0.006 and $0.0084 per stream in royalties.
In response to Swift’s decision, Daniel Ek, CEO of Spotify, publicly published his defence of the allegations, stating that “top artists like Taylor Swift (before she pulled her catalog) are on track to exceed $6 million a year”.
This figure is very large, but comes from millions of streams. Actually, billions. Divide 6M by 0.0060 and you get 10,000,000,000 (10 Billion) streams. If all of Taylor’s songs were streamed 10 billion times collectively, then her and all the rights holders would split the revenue generated by the song streams accordingly, and even then Taylor Swift herself would only receive a portion of that figure.
A recent article from Scott Borchetta, the CEO of Swift’s record label Big Machine, stated that the actual payout they have received totals exactly $496,044 from domestic streams, only a portion of what Daniel Ek talked about.
“Everybody’s complaining about how music sales are shrinking, but nobody’s changing the way they’re doing things. They keep running towards streaming, which is, for the most part, what has been shrinking the numbers of paid album sales… People should feel that there is a value to what musicians have created, and that’s that” – Swift.
Here’s how I see it:
Spotify are not exactly the bad guys, like nearly everyone on the planet, they are passionate about music. And the one single thing that hurts the music industry the most is piracy. Like the ingenuitive guys they are, they came up with an idea that music should be free to enjoy for everyone, but artists should still get paid.
And so the ‘Premium’ model was born, the first of it’s kind as Spotify entered the market in 2008. Ad supported music so people can listen for free, artists get paid from the ad share, and if users don’t want ads, they pay for a premium service which also gets split between the service and the rights holders, thus hoping to help minimise piracy, offer free (or paid) music and still pay the artists. It was a win win win dream.
However, like Swift says, it is still a bit of a ‘grand experiment’. Currently, even though spotify has over 50 million active users, the piece of the pie the rights holders receive is not a very large one. Many artists aside from Swift have also made the move to pull their music or abstain from the service, including AC/DC, Garth Brooks, Pink Floyd, Radiohead, Bob Seger, Tool, Jason Aldean and The Black Keys to name a few.
Ironically, it’s not really the big artists that are hurt the most, it’s the small indie bands that are largely unheard of that will never see any return from the time, effort and money they put on to actually getting their content added to the service through an aggregator. And yes, all content must go through an aggregator. Spotify is not a large discovery engine, nor is it guaranteed to make you a profit, you just might get a little less piracy.
With the majority of audiences now mobile with 24/7 connections to all apps and people, we can now safely say we are very much in the digital age. Audiences are opting for digital consumption over traditional and we’ve seen massive declines in the physical sales of CD’s, DVD’s and Blu-Ray. But as fast as tech devices and people have moved, technology services are scrambling to adapt, the recipe is still being perfected and the music (and film) industries are still being redefined.
In the independent film industry, traditional distribution is out and digital is in. But that doesn’t mean that the system is right just yet.
Media streaming ad supported and subscription services like Netflix, Hulu, and Spotify were the early adopters, it’s what they thought audiences wanted! Unlimited content for a set price or for free. However these services are hurting artist’s profit margins and are in no way helping to create a sustainable ecosystem for the entertainment media industries.
As far as media-absorbing audiences go there are two truths of the matter, one: There will always be people that are willing to pay for content, and two: there will always be people that will not. It’s separating these audiences and targeting the ones that will pay first that will help artists get the maximum return for their content – and streaming services are not the first answer.
This is where we look at release ‘windowing’, where filmmakers should be releasing their content first on transactional models that use PPV (Pay Per View), DTO (Download To Own), TVOD (Transactional Video On Demand), or EST (Electronic Sell-Through), months before it appears on any subscription-based services.
This way, the loyal fans that have been waiting for films to be released will of course pay to digitally rent or purchase new release movies at a transactional method. Once sales start to plateau and decrease on transactional platforms (which I can promise will evidently happen after the hype dies out), only then should content be released on subscription avenues, as that second audience, the ones who won’t pay much can then access and watch content which will then give a long tail return profit.
Taylor Swift made the decision to pull her catalogue from Spotify before her 1989 album release, which then went on to be the most successful album release in 12 years at over 1.2 million copies sold in the first week. You can bet that this never would have happened had she been on Spotify. Filmmakers, take this example and translate it to the film industry: Don’t aim for a Netflix release first off, sell transactionally and make your release count.