Newsletter #112: Swift Exit

12 Nov 2014

Credits: Jon Åslund

Many words have been written on merits of the economics of streaming – and the payout artists receive – and perhaps none more so than right now.

If the recent slew of comment following Taylor Swift’s exit from Spotify is anything to go by, it’s still surprising that there isn’t more appreciation that this is at least as much about the transparency of the artist-label and label-services agreements as it is about the services themselves, as highlighted in our Artist Economics of Streaming event earlier this year.

It’s not our job to to defend Spotify, but perhaps Swift’s label, Big Machine, is somewhat missing the point – at least the free tier of Spotify hopefully attracts some of those resistant to any paid-for subscription service, who then might then convert to becoming paying subscribers and move away from unlicensed content consumption*…surely that’s in everyone’s interests if the industry is to sustain itself?  (It also ignores the fact that Spotify’s ‘Mobile Free’ tier itself has restricted access – users can’t call up specific song choices, so it isn’t free as in ‘any track I choose, unlimited, forever’, but as I say, it has to fight its own battles).

Of course artists and managers must ultimately decide what’s right for them, and its within their gift to deny any platform content but clarity of approach is essential if it’s not to give consumers a mixed message, which is not in anyone’s interests.  It’s in this context that that official line from Big Machine, appears contradictory.

Hanging its rationale on the peg of fairness to the engaged, full-price-paying superfan (“we never wanted to embarrass a fan” [by making it available for free]) what appears to have slipped under the radar of many is Swift’s 1989 album being made available at an eye watering 99 cent price-point, via Microsoft’s Xbox platform (and presumably sanctioned by Big Machine, ‘else wouldn’t they have pulled the plug on that agreement too?).

Doubtless Microsoft pays the label considerably more per unit sold than it is selling it for, and is likely running this as a loss leading campaign.  But the fact consumers are able to buy the album for just 99 cents highlights an inconsistency in the label’s message to the consumer, that ‘free’ is somehow deceiving Taylor Swift fans who’ve paid full price for any of her releases?  Isn’t such a low price-point equally undermining of its principled stance against Spotify’s freemium service?

To be sure, Big Machine is a progressive and influential.  Two years ago it brokered a ground-breaking deal whereby US broadcast conglomerate Clear Channel agreed to pay public broadcast performance royalties to Big Machine Group and it artists – a precedent–setting deal given the United States is one of very few countries that does not legally mandate a right of public performance in the sound recording for terrestrial radio broadcast.

The debate will run and run, but we feel the argument really lies elsewhere – the price-point for premium subscription services.   Highlighted in Mark Mulligan’s recent post, in order for streaming services to gain serious traction and make up for the declining number of download and physical sales, the leap from zero to £9.99 is just too big to appeal to the ranks of the ‘yet-to-be-converted’.

As Ben Dawson commented at our recent event, we live in an era where people will happily spend money on their mobiles, but aren’t prepared to pay for music.

Yet there are encouraging signs from some quarters that streaming platforms are growing their revenue generating capabilities for artists, with publishing and music services company Kobalt recently announcing that its publishing income from Spotify has eclipsed that of its iTunes (Europe) earnings, and Spotify’s Premium tier is reported to be growing quicker than ever.

Whilst cynics might point out this could be a consequence of declining download sales more generally, regardless, it does positively illustrate the value of streaming in terms of potential revenue.

It just needs to flow through more equitably and transparently to the artist.

Editorial by Jonathan Robinson

* Since writing this editorial, Spotify CEO Daniel Ek has confirmed that 80% of its Premium subscribers have converted from its free tier here

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