2013-07-17

Co.Labs

Sure, We Like Spotify--But Thom Yorke Has A Good Point

In case your Internet's been down, the Radiohead frontman has joined his creative co-conspirator Nigel Godrich in decrying Spotity and the economics of streaming services like it. He’s not just being grumpy.



Thom Yorke is pissed. In case your Internet's been down, the Radiohead frontman has joined longtime creative co-conspirator Nigel Godrich in decrying Spotify and the economics of streaming services like it. Atoms For Peace, the Radiohead side project on which Yorke and Godrich collaborate, has pulled its catalog from Spotify, citing inadequate compensation for new artists. I've been a happy subscriber to Spotify since the day it launched in the U.S. But these guys have a point.

This latest round in anti-Spotify sentiment is best summed up in a single sentence: "It's bad for new artists," Godrich wrote on Twitter. He went on to elaborate, spelling out why he thinks the model is unbalanced for new artists.

"The reason is that new artists get paid fuck all with this model. It’s an equation that just doesn’t work… If you have a massive catalogue – a major label for example then you’re quids in. It’s money for old rope. But making new recorded music needs funding. Some records can be made in a laptop, but some need musicians and skilled technicians. These things cost money."

Thom Yorke piled on, tweeting, "Make no mistake new artists you discover on #Spotify will not get paid. Meanwhile shareholders will shortly being rolling in it." Spotify defended itself, saying that it's paid out $500 million to rights holders, to which Godrich fired back, making the crucial distinction between "rights holders" and artists. For good measure, he reiterated his gripe about the way new artists are compensated compared to older artists with expansive, already lucrative back catalogs. Meanwhile, Radiohead co-manager Brian Message chimed in defending Spotify as well as Yorke and Godrich's right to spark a healthy debate about the whole thing. And spark it they have.

Not The First Anti-Spotify Screed, But One That Matters

This isn't the first time artists have made a stink about Spotify's pay model. The reason it matters so much this time is because Thom Yorke and Nigel Godrich were largely responsible for the most critically acclaimed rock album of the 1990s and their work (along with that of the other members of Radiohead) has remained a hugely relevant cultural force ever since OK Computer dropped in 1997. Plenty of artists have complained about Spotify, but rarely are they this influential.


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Indeed, this issue has been an ongoing P.R. crisis for the company, which is eagerly trying to paint its all-you-can-stream model as the future of music consumption. In two short years in the U.S. market, Spotify has seen explosive growth and impressive subscriber conversion rates. And for good reason. The service has a massive library of music, lets you merge your own tracks, sports very useful third-party apps (on desktops anyway) and is continually investing in their mobile presence. What's not to love?

For some new artists and smaller labels, this new era in music consumption has been marked by a great deal of anxiety over compensation. I can see why. Spotify struck huge, expensive deals with the major labels and countless indies and indeed pays out an extraordinary amount of its cash to these rights holders. At issue is how much of that money trickles down to the artists themselves. The labels are clearly satisfied enough with Spotify's terms to sign these licensing deals. But record labels and artists are different entities, the former not being known historically for its generosity to artists. As many well-publicized cases have illustrated, the streaming revenue that trickles down to artists is often minuscule.

Spotify’s Long-Term Strategy Vs. Artists' Short-Term Needs

In its own defense, Spotify argues that a given song or album can be more lucrative over time than downloads can, since downloads are paid for once and streams accrue a tiny bit of revenue every time somebody listens. So, if a record has staying power among fans, Spotify argues, it can make them lots of money over time. Meanwhile, the company is banking on its ability to grow paying subscribers and ad revenue over time, which will theoretically increase the revenue pie for everyone.

But while Spotify argues about the long-term potential, artists are hungry now. Recording and producing an album may be easier than ever, but doing it well still costs time and money. Pressing vinyl or any other physical release is another big expense, and a necessary one for bands who are playing shows and want to show up with more than a stack of MP3 download cards on their merch table. There's a reason bands are turning to Kickstarter to get their music and other creative projects funded. This stuff is expensive. And paradoxically, in today's music marketplace, the correlation between popularity and financial success isn't necessarily a given.

There is a similar-seeming controversy swirling around Pandora right now. As familiar as much of the rhetoric may sound, the Spotify royalties debate is actually quite different from that. Pandora is an Internet radio service, whereas Spotify provides on-demand access to albums and songs. It thus has a much greater potential of cannibalizing album sales, at least in theory. It's easy to see why. There are at least a dozen albums that I stream regularly on Spotify. Whenever I see one in a record store, I'll buy it on vinyl if the price is reasonable and it comes with a free MP3 download. But there are plenty of them that I simply haven't come across, so my access to them on Spotify effectively serves as a type of ownership. As long as I dole out $10 per month to Spotify, those albums will be available on my laptop, iPad, and phone whenever I want to hear them. In all likelihood, these artists aren't getting much money from my obsessive listening.

When Godrich and Yorke complain about the inadequacy of Spotify and its competitors for new, up-and-coming artists, it's hard not to be sympathetic. Diehard fans may still seek out the album for purchase, but what about those more casual listeners who habitually turn to Spotify to listen to music at work or in the car? If they weren't paying for Spotify, would they buy those albums? Would they just pirate them? Would they even know about them? Perhaps future studies will unlock insights into the answers to these questions. In the meantime, it's impossible to know for sure, and all those question marks make artists queasy.

Why Yorke And Godrich Have A Point

Yorke and Godrich are right to raise a stink about this and remove the Atoms For Peace and Thom Yorke records as leverage. Spotify, Rdio, and the other streaming services are awesome, but they exist on terms that were hammered out between tech companies and record labels, not necessarily with the interests of new artists in mind. If the industry is going to continue forward with this all-you-can-stream, only-buy-music-sometimes model, artists have every right to step up and make a grab for their rights. The idea (hopefully) isn't to shut down the Spotifys and Rdios of the world, but rather to make sure that artists who aren't Metallica can get a fair cut in this new world.

While I'm sympathetic to Yorke, Godrich, and the other artists who have complained about Spotify's model, I'm no less enthusiastic about the potential Spotify holds for my own band, a psychedelic rock project called Harsh Vibes. Next week, we're releasing a four-song EP on a small cassette label in Savannah, GA. It's a tiny operation, so digital distribution is on us. We already have half of it up on BandCamp, and will add SoundCloud and YouTube soon. I've already set up an artist profile on Google Play and am getting ready to go through an aggregator like TuneCore to ensure the entire thing lands on iTunes, Amazon, and yes, Spotify.

As a band, we're not at all nervous about Spotify. Instead, we're excited about the idea of getting it up on as many services as possible, but we're not even thinking about money. What's more enticing for us, as a new, unknown band, is the prospect of getting the music out there and heard by as many people as possible. Meanwhile, we're playing shows locally, embarking on short tours, selling shirts, and hoping the widespread availability of our music online doesn't deter from spending a few bucks on our records at shows.

It only seems fair to mention that playing music isn't my full-time job, nor is achieving that coveted status my intent. I have a day job that I love, mostly writing about stuff like this. In fact, I'll certainly get paid more to write this article than my band will see from a year's worth of streaming on Spotify. Thus, my perspective isn't quite the same as that of somebody brave enough to try and become a full-time musician. For those people, the potential to actually make money is limited and despite the paradigm-shifting magic of the Internet, whatever money-making possibilities exist feel like they're constantly dwindling.

I play in a band because I very much enjoy it, but when I think about the amount of energy (and money) that goes into it, the paltry financial payoff feels like it should enrage me. I wouldn't put this much energy into anything else that didn't pay a salary, so why this? The short answer is that I love it. But that rationale only stretches so far. At some point, we'll need to at least break even for this to be worth our time. Selling recorded music may or may not be a significant part of that equation. For now, we're content to use Spotify and similar services as a promotional vehicle. Eventually, something will have to give. Even if Spotify can't cut us a bigger check, there are definitely things they could be doing to help artists.

What Should Spotify Do?

For Spotify, there's no simple way forward. They could consider tilting the balance of their payouts so that independent and up-and-coming artists get a cut that feels more substantial. But the company is already locked into necessarily pricey deals with the labels that eat up massive quantities of their revenue and there's not a lot of wiggle room on their balance sheets as they try to prove that this model makes financial sense in the first place.

But they've got to do something. Perhaps while the larger business model is shaking out, they could build tools that help artists drive other types of revenue and more easily promote themselves. The desktop add-on app for Songkick, which notifies users of upcoming concerts by bands they've listened to on Spotify, is a great start. The process of buying tickets could be integrated into the Spotify desktop client. Maybe Kickstarter integration is one of the next steps. Like this artist? Click here to fund their campaign to record their next album. We already have your credit card. We'll just debit it from your account next billing cycle.

Tighter integrations with other artist-friendly platforms should be a priority. So should giving artists the ability to claim and control their own artist profiles. Add a Facebook like button. Follow us on Twitter. Buy our merch. Here's a paid download of the album you seem to love so much. Here's a track you can't stream.

There are plenty of options to make life easier for artists, and it doesn't feel like Spotify has come anywhere close to exhausting them all. If it wants to quell this P.R. nightmare before it flares up any further, perhaps baking a more artist-first mentality into their core product is the way to go.

Interested in digital music and the future of radio? It's an ongoing story we're tracking here on Co.Labs. Join us.

[Image: Flickr user Michael Carian]




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12 Comments

  • $6871436

    Whether you agree with Yorke or not on this issue, you can hardly paint him as some kind of Luddite eager to halt the embrace of digital models.   Radiohead have done more than almost any major act to pioneer ground in digital distribution methods and models over the years.  They've openly embraced allowing fans to download music for free, and in producing things like fan related videos without fear of copyright action being taken against them.  He just doesn't feel this one particular model is very fair or workable to a subset of artists who don't have the other resources or income streams his band does. 

  • ridersone

    I share John's excitement about the potential that Spotify offers in regards to getting the music out there and being heard by as many people as possible. I would love to hear first hand experiences from the small artist. For instance, how do you get listed in the discover list next to a big band that may sound similar. That is huge, but I am not really seeing any unknown bands pop up in my discover list. Also, Yorke is not exactly a small artist.

    My band (ahem... The Freeks) is about to go down the same path as Harsh Vibes. We are releasing on our own label and plan to distribute through all the digital channels via TuneCore. Being a first timer to all of this, I really do not know what to expect... but the available promo tools available today are way better than what was around pre Spotify.

  • Cal

    Radiohead music is still on Spotify...if Yorke really gave a damn and wanted to make some waves, he'd pull THAT catalog from the service.

  • $6871436

     They're a famously democratic band.  Perhaps he can't (or is unwilling) to pull that music without the consent of the other members, though at least one of them (Ed O'Brien) has made some similar statements about streaming models like Spotify in the past.

  • DFS

    Why is it Spotify's problem that "rights-holders" (labels) screw over the original artist?  Shouldn't the argument really be circumventing the Big Corporate System that has been bleeding artists dry for decades so the artist gets a bigger slice of the pie?

  • iwantcleanair

    Nicely presented article.  

    The key point is that Spotify does cannibalize music sales (downloads, CDs, etc).  From a listening experience perspective, Spotify is exactly equal to owning the music.  However, from a financial perspective it appears to be off by orders of magnitude.  

    If we buy a track for a dollar and listen to it 50 times (which is a lot) that is $.02 per listen.  On spotify each listen is worth something like $.001.  It takes 20 listens on Spotify to catch up to a single listen (for a heavy listener) via purchase.  It is this disparity that needs to be fixed.  

  • Anil S.

    Nice article. I thought it was pretty fair and balanced. I'm of the opinion that Spotify is actually good for the music industry on the whole but I agree there are things it can do to improve the profitability of new artists. I take issue with Yorke and Godrich's specific condemnation of Spotify purely because of the royalty system. That's like complaining to a radio station about the obscenely low amounts artists get paid every time their song gets played, it's actually less than what Spotify doles out. Ultimately, it's going to be up to musicians to decide whether they're comfortable with a longer road to success and sustainable income. I don't believe that music streaming is "bad for music" though because the artists that I listen to on Spotify I probably never ever would have found otherwise, unless I made a habit of trolling music blogs. And I also believe in supporting the artists I love and buying their music. I think/hope Spotify and music streaming in general will inspire people to buy music instead of illegally download it and one day artists won't even need labels for distribution so that they can keep the royalties for themselves.

  • $6871436

     In the US, that may be true, but it's important to note that Yorke is probably arguing from the perspective of a UK based artist.  Many of them previously have complained that Spotify royalties are much lower than BBC Radio royalties, which are an important source of income for them.

  • Karen Kazaryan

    I have two questions for Yorke: When exactly was this nice and fluffy time where new artists had it easy? How exactly Spotify makes it harder for new bands, compared to old model? In my opinion, Yorke reaction is completely backwards.

  • Mari_Dupont

     Yeah, the article doesnt offer specifics. Just sweeping statements about artists "getting screwed." Ok, does a song by a new artist on an indie label get a lower payment then a song that's 40 years old from a major label's catalog? Yes or no? If no, then what's unfair? The problem seems to be that no one knows the new artists exists and no one streams their music. Now, that's not good and Thom is suggesting that new artists somehow get some sort "separate promotion" to make them stand out. Ok, nice, but how exactly? If you want to rant, at least offer some specific remedies.