I’ll just skip to the chase. I think Spotify is a disaster for the music industry and here’s why.

Search for “spotify piracy” on Google and you will see that they have done a fantastic job painting a rosy picture as being an alternative to piracy.  Truth is, they probably are.  The restrictions on the free version are bearable enough for anybody who prefers not to break the law to put up with, and $5 a month for no ads pretty much means you can listen to whatever you want without breaking the law and without advertisements.  Alternative to piracy?  For most users, I believe it.

So what’s my beef?

The service may do a good job fighting illegal file sharing but it also does a great job of eliminating any motivation to buy an album that you can listen to through the service.  While supporters of Spotify and Spotify themselves say they help people discover new artists – so what?  After that, does the person rush off to buy the artists’ album?  Why would they?  They already have access to the album.  And for $10 this is true for across every device they have.

The reality is that this is a great alternative to piracy because it’s only barely different from an economic standpoint.  Paying zero, $5 or $10 for access to 15 million songs values each at fractions of a cent – and that’s precisely what most artists make from having their music included in the service.  It’s pretty clear from both a solid analysis of the streaming world and the response from respectable labels like Century Media that the compensation to artists is garbage.  The company claims otherwise but refuses to provide clear figures around their fee structures, and probably for good reason.  The reality is, I’ve seen Century Media’s napkin math on it, and even at double or triple that rate it’s a joke.

Spotify argues the fact, claiming they paid “tens of millions of Euros” in 2009, but even at $30M Euros (which is way more than they paid), that’s less than $3 per track to rights holders, let alone artists.  Given that the major labels have muscled their way into the lion’s share of these fees (and not even in royalties, but fees that are not split with artists), the amount that goes to any artist, especially any whose album is not played in the millions of spins area, is minuscule.

And while Spotify and other proponents of a world where music is almost entirely free might argue that some money from this service and awareness are better than no money and obscurity, the fact is that services like Pandora, Earbits and others encourage discovery without making it pointless to buy the album.  Even with our reduced royalties I feel more than confident taking a stand on this issue because at least our service makes some attempt to create an emotional connection between listeners and artists.  We create on-demand limits that let people explore music without removing the need to purchase it, and try to remind people that these are real artists and real people by providing large photos, bios, and more.  On Spotify, an artist is little more than a name and a list of track titles.

I hope more labels will come to the conclusion that Century Media and others have.  In a Spotify world, it may be a world with no piracy, but it seems to me to be a nail in the coffin of respecting recorded music as an art that’s worth supporting financially.  If I’m spending $10 per month on Spotify, I might be hard-pressed to buy an album they don’t have.  I am certainly not buying one they do.  At fractions of a cent, it will take thousands of spins before an artist will make the same as they would had I bought the album, and that means that more great artists, particularly the ones making unique music that isn’t being digested by 14 year old kiddies are going to start having more and more trouble affording their studio time and a reasonable lifestyle.  Not only does that not appeal to the artist in me, but it’s not the kind of music supporter I want to be either.

** This post written while listening to one of four Deftones albums I have proudly purchased **

Joey Flores
CEO, earbits.com
[email protected]
Listen at www.earbits.com
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Twitter: @earbits

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