Europe's hottest music-streaming service may have launched to much fanfare in the U.S. over the summer, but not everybody is enamored. Spotify's royalty payments, it turns out, bring significantly lower revenue to artists than digital and physical music sales. For a growing number of smaller artists, this has quite literally become a deal killer, as many of them have opted to keep their music off of Spotify and similar services.
ST Holdings, a music distributor that represents over 200 labels, recently asked those labels if they would like to keep their catalogues on services like Spotify and Rdio. Four of them said yes. So, citing a recent survey showing that streaming services hurt music sales, ST Holdings pulled its music from Spotify, Rdio, Napster and Simfy.
At first glance, the notion of over 200 labels pulling out of Spotify might seem like formidable news for the relatively young service. A recent story on Wired.com explored whether or not this spells doom for all-you-can stream music. While there are certainly legitimate questions about the long-term viability of Spotify's business model and its royalty payments to artists, Spotify isn't going under anytime soon.
200 Music Labels Sounds Like a Big Loss...
The ST Holdings labels weren't the first to pull out of the digital streaming business. A number of small, independent labels have done so and recently bigger acts like Coldplay have declined to make new material available on Spotify.
While 200 music labels sounds like a lot of content, it's worth noting that these are also relatively small labels, most of which specialize in various sub-genres of electronic music. There's very little risk of any of the major labels dropping Spotify, event if a few big name artists with enough clout may follow Coldplay's lead.
In addition to the four (okay, three) major labels, Spotify and its competitors still have most of the bigger independent labels, including more than 12,000 represented by Merlin. For the time being, the majority of popular artists, both mainstream and indie, are available on Spotify.
You Can Still Get Any Music You Want and Put it in Spotify
When Spotify finally launched in the U.S. this summer, I put it through its paces for about 48 hours, and then signed up for the premium account, dropping Rdio in the process. As much as I liked Rdio (and still miss its UI sometimes), one of the killer features of Spotify had for me was its ability to merge my locally-stored music files with its giant library in the cloud.
The truth is, I don't expect every artist on the planet to be included in Spotify's library. As long as a sizable (and growing) selection of artists is there for me to stream, I'm perfectly content acquiring other music directly, especially from local artists who may not be signed to even a tiny label.
When I do, I can download those files to my laptop and listen to them from the same desktop client I use for streaming. When I sync my iPhone and iPad with Spotify, that music is then transferred to those device and is available to me when I'm on the go.
The Music Industry is Still in Transition
Ten years after the demise of Napster, the music industry is still very much in transition. What will have emerged another decade from now is going to look different from what we know today and the shift probably isn't done being disruptive.
To be sure, the concerns artists have over the low payments offered by all-you-can-stream model are perfectly legitimate. It's undeniable that direct downloads and even physical music format sales generate more revenue than services like Rdio and Spotify. However, Spotify has only been live in the U.S. for four months and is still growing. As that happens, its competitors are adapting. In time, the model should become more profitable for arists Both Apple and Google have also stepped up their game in the digital music space recently.
Just as I, as a consumer, have multiple ways to legally acquire music, artists have several choices when it comes to selling and distributing it in this new digital ecosystem. Streaming services are one of them. iTunes and Amazon's MP3 store are others. As of last week, artists can now upload their own music directly to Google Music and set their own prices. Similarly, tracks can be sold via Bandcamp.
Even with these options, it's possible that the recording and distribution of music may not forever be as lucrative as it is today. Tomorrow's model may include a hybrid from music sales, merchandise, performances and perhaps other factors that have yet to fully emerge.