Pressure on Spotify to change its tune
Music was one of the first industries to have its foundations ripped away by the internet – and it’s been among the first to emerge from the wreckage.
Big labels such as Universal and Sony have Daniel Ek to thank for saving them from extinction. Since founding Spotify in 2006, he has persuaded 155 million people to pay for music, instead of ripping tracks from illegal download sites.
Formany people, a streaming subscription has become an essential purchase, like their broadband or mobile phone bill. Record companies deserve some credit for giving their business models a digital re-tune.
Perhaps inspired by Curtis Mayfield’s Keep On Keeping On, labels have stuck to their knitting. When piracy was tearing the industry apart, they refused to accept that their product had no value. In contrast withmany news publishers, which chose to give away their articles in the hope of winning advertising income, labels demanded payment. Their tenacity has been vindicated.
Despite the shutdown of concert halls, music revenues rose by 7.4 per cent to US $21.6 billion last year – the highest level since 2002, according to a report from the IFPI trade body this week.
The number of paid subscriptions rose by 19 per cent to 443 million globally last year, nearly three times the 2017 level. Streaming now accounts for 62 per cent of total revenue.
The Spotify bonanza has not gone unnoticed among investors. Universal Music, the world’s biggest record company, is going public for €30 billion. Spotify has doubled in value to $50 billion since this time last year. And there is a wall of cash chasing music royalty deals.
Funds such as Hipgnosis, Round Hill and Primary Wave are vying to acquire back catalogues, the value of which has soared thanks to the popularity of streaming.
Bob Dylan, Neil Young and Shakira are among the artists to have sold their songbooks recently. The collapse in touring incomewill push manymore through the exit door.
Yet there is dissonance between the music’s status as a prized financial asset and the position of middling artists in the food chain.
Streaming has amplified the divisions between chart-topping musicians and everyone else
A singer like Dua Lipa, whose Don’t Stop Now was streamed 1.6 billion times last year, earns millions of pounds a year in royalties from Spotify, Apple Music and the like.
Life is not so sweet for lowerprofile artists. Lastweek Spotify revealed that it paid 870 artists at least $1 million a year, with 7800 earning at least $100,000 and a further 13,400 receiving at least $50,000. Musicians in the lower bandwill be scraping little more than the living wage once their streaming fees are shared between bandmembers and their manager, producer and music publisher.
Nadine Shah, a critically acclaimed singer-songwriter, said recently that she didn’t earn enough from streaming to pay rent.
An industry that does not reward its workers fairly cannot be sustainable and pressure is growing on Spotify to redress the imbalance. The company returns about two-thirds of its revenues and to boost artist payouts and startmaking profits, Spotify must continue to build its subscription base.
That creates a dilemma for Ek. Much of Spotify’s recent growth comes from emerging markets like Latin America, where it charges lower prices. Yet the big labels want Spotify to raise monthly charges inmature territories, such as Europe and the United States.
Ek changed consumers’ perception of the value of music. Will he put that at risk by asking them to pay more?
The Times