November 19, 2011

Why are indie labels leaving Spotify?

Mario Aguilar:

UK-based STHoldings says it is removing 238 labels off Spotify, Rdio, Napster, and Smify by request. All but four of its distributed labels specifically requested off of Spotify. STH accuses streaming services of “cannibalizing” their digital revenue, and cited a study commissioned by the music business association NARM, which revealed the not-so-startling news that people who use subscription services are less likely to buy physical or digital music. STH says their undisclosed internal numbers confirm NARM’s findings.

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STH’s revocation of its catalog from Spotify sucks for the fans who use the subscription service, but it’s not that surprising considering STH represents homegrown independent labels. The company mostly distrubutes music in niche electronic music genres, but it could just as easily be a tiny label that produces indie rock in Seattle, backpack rap in New York, or blues in Memphis. These labels and their artists earn their keep — or sometimes merely their subsistence — by selling physical and digital music to devoted fans all over the world. These labels need to sell records to survive, and unfortunately Spotify only pays a pitance per stream. If a label doesn’t have the reach of a major it’s not going to make anything using the service.

Projekt’s Sam Rosenthal pulled his label’s music from Spotify earlier this year, claiming that “For a stream on [Spotify]... on average $0.0013 is paid to Projekt's Digital Distributor."

I understand that many fans feel the “exposure” Spotify offers is worth the almost non-existent payment They tell me that [Spotify] is a way to build a new fan base for the music. I understand that, AS A CONCEPT. However,  comments from fans of Spotify consistantly include some variation of the phrase, “I no longer buy music now that I can get it for free on Spotify.” While Spotify claims to have caused a decrease in piracy, in my mind they are just creating a form of piracy with the appearance of being Legal. Their claim that they provide compensation to the artists causes listeners to assume it’s honest and fair compensation, and therefore acceptable.

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Royalties are the main way that most Projekt artists earn money. Replacing that income stream with $.0013 isn’t viable. Here’s my analogy: Let’s say you earn $50,000 a year, and your new boss (Spotify) says your salary has been reduced to $200 a year. However, if his customers start subscribing, he’ll pay you $800 a year. Would you be able to keep paying your rent and afford your son's shoes? The answer is "No" and you would not keep that job. HOWEVER, a lot of people are arguing that artists should keep the job. Not workable.