The launch of Spotify in 2008 was largely seen as a beacon of hope for an industry drained mercilessly from a decade battling waves of digital piracy, beginning with the establishment of Napster in 1999. As we approach Spotify’s 13th year of service, we look into who has benefitted from this platform, whether the artists themselves have gained from this piracy alternative, and if there is money in streaming?
To contextualise the creation of Spotify and streaming services in general, it is important to understand just how damaging piracy was, and especially how clueless the music industry was in their approach to finding a solution. It is well documented that artists such as Metallica and Dr. Dre sued Napster for the creation of what was essentially the iTunes Store with a less desirable GUI.
Metallica used to encourage fans to distribute bootlegs of their early shows, and this undoubtedly benefitted their growing audience. So, why was it such a crime when fans were doing the same thing by sharing demos of their upcoming album? Many Metallica fans were asking the same question, and it’s a stigma that still haunts the band, who were happy to use this organic method of distribution to climb their way to fame yet sharply pulled up the ladder when it prevented them from making more cash.
Did Metallica really have a say in the matter? Or was the real issue that record labels were losing money? Metallica did eventually change their tune, and the majority of artists were sympathetic regarding fans downloading their music.
Liam Gallagher and Dave Grohl both suggested the billionaire artists should be a bit more understanding. You almost got the sense that they understood people being desperate to listen to your music would translate to some kind of financial benefit eventually.
Besides, the writing was on the wall for some time. Fans were being fleeced by labels, with artists often bearing the brunt and becoming frustrated themselves. When Nine Inch Nails asked a label representative why their album was so expensive they said, “It’s because we know you have a real core audience that will pay whatever it costs when you put something out – you know, true fans. It’s the pop stuff we have to discount to get people to buy”.
At the time, he internet had only just cropped up, and it wasn’t a slight revelation that music file sizes were small enough for people to share quickly online. Labels were just too ignorant to change how they did business, blinded by greed and looking to delay the inevitable digitalisation for as long as possible.
The creator of Napster was a student, albeit a pretty clever one who dropped out of university to dedicate his time to the webpage. However, he hardly had the resources acquired by some of the major labels through decades worth of collective experience in physical releases. The reason a student created a file sharing system before Spotify, Warner, Apple or Sony was that he was motivated by the concept of sharing music and not primarily motivated by the money.
Ironically, both Napster co-founders are now doing pretty well for themselves.
Now that labels have finally begun to catch up with the streaming model, why are there still regular headlines and social media posts from artists complaining about a lack of pay? Is this true?
When Spotify launched, the biggest labels at the time – Sony, Warner, Universal and EMI (bought out by Universal) – all invested in Spotify shares amounting to a collective 17% stake in the company for what can now be considered a pretty measly £8000.
Hopefully everyone beyond the casual music fan is now well aware that artists average around half a cent for every stream. However, Spotify somehow now has a market value of $50 billion dollars. This results in an $8.5 billion profit if these labels all retained their shares.
With this in mind, you could certainly argue that it would actually be more beneficial for these labels to allow their artists to get exploited by Spotify, or certainly to not actively campaign against them doing so, knowing that this exploitation only increases the value of the shares in the streaming service.
Should artists be entitled to a percentage of the Spotify Pie? It is certainly not up for debate that they have played the most significant part in the company’s growth. Label’s themselves have now shifted to the 360 model, taking a percentage of artist tour income, merchandise sales and other artist specific revenues.
So why should artists not be able to claim a percentage of the label’s share in Spotify?
Spotify themselves have always argued that whilst their growth has been meteoric, their value is not in the form of liquid assets. Yet if this is the case, how can they afford to pay Joe Rogan a $100 million dollar licensing deal, if they can’t pay Taylor Swift above a cent per stream?
Furthermore, what has Joe Rogan done for Spotify that allows him to walk into a $100 million dollar deal? For an artist to earn $100 million through Spotify they would have to make 23 billion streams…
It is not yet clear what this deal means for Spotify’s future plans and whether they will look to reinvest the money from the increase in subscriptions into artists and their streaming content, or whether they will now begin to turn their backs on the workhorses that have built their value for the last 12 years and whom are yet to receive reward for their work.