200+ Labels Withdraw Their Music From Spotify: Are Its Fortunes Unravelling?

• By Duncan Geere
• 
• November 18, 2011  | 
• 10:28 am  | 
• Categories: Media, Music
• Follow @DuncanGeere

Following a study that claims that streaming music is damaging to record sales, a distributor representing more than 200 labels has withdrawn its entire catalogue from Spotify, Napster, Simfy and Rdio.

Disquiet from musicians and labels over the royalties paid out by Spotify has plagued the music service almost since it first launched

The study, which was conducted by NPD Group and NARM, came out with results suggesting that subscription services — where you pay a flat fee each month to access a giant jukebox in the sky, rather than owning individual tracks — is discouraging other forms of music purchasing. You can find the further details of that study over at Digital Music News.
That prompted STHoldings, which focuses on techno, grime, dubstep and bass music, to contact the 238 labels that it has on its books to ask if they wanted it to keep distributing content to Spotify or withdraw it. Only four said they wanted to keep their content on Spotify. Interestingly, though almost certainly unrelatedly, Music Ally has noticed that a band signed to one of the labels counts Apple’s director of music for iTunes Europe as one of its members.
A statement from the distributor reads: “As a distributor we have to do what is best for our labels. The majority of which do not want their music on such services because of the poor revenues and the detrimental affect on sales. Add to that the feeling that their music loses its specialness by its exploitation as a low value/free commodity. Quoting one of our labels, ‘Let’s keep the music special, fuck Spotify.’”
We asked Spotify for comment, and a spokesperson told us:

“We have strong support from the music industry, and of course respect the decision of any artist who chooses not to have their music on Spotify for whatever reason. We do however hope that they will change their minds, as the Spotify model is adding, and will continue to add, huge value to the music industry. Right now we have already convinced millions of consumers to pay for music again, to move away from downloading illegally and therefore generate real revenue for the music business.
“In addition, ‘revenue per stream’ totally misses the point when considering the value generated by Spotify. The relevant metrics are: 1) how many people are being monetized by Spotify; 2) who these people are (usually young people previously on pirate services which generate nothing for artists and rightsholders); and 3) how much revenue per user Spotify generates for rightsholders.
Artists can — and do — receive very substantial revenues from Spotify, and as Spotify grows, these revenue streams will naturally continue to grow. Spotify is now the second single largest source of digital music revenue for labels in Europe (IFPI, April 2011) and we’ve driven more than $150 million of revenue to rights holders (ie whoever owns the music, be it artists, publishers or labels) since our launch three years ago.”

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Disquiet from musicians and labels over the royalties paid out by Spotify has plagued the music service almost since it first launched. Back in 2009, a storm in a teacup erupted after it was revealed that Lady Gaga got just $167 for more than a million plays. That figure was thoroughly debunked, but the idea behind it has persisted and Spotify hasn’t helped matters by keeping any royalty discussions under a strict veil of secrecy.
Charles Arthur from the Guardian attempted to pierce that veil in late 2009, and the results were a mess of calculations and corrections. A second attemptwasn’t much clearer, and a recent infographic trying to piece things together has been universally condemned by all parties. Recent top-sellers like Coldplay and Adele have actively avoided Spotify for their newest albums, because their management know the record will sell widely regardless and Spotify’s audience isn’t likely to be especially keen on those artists anyway.
Complicating matters is that the four major labels own part of Spotify themselves. 18 percent, according to TechCrunch, which was likely part of the conditions for licensing their catalogue to the streaming service in the first place. Merlin, which represents independent labels owns one percent. It does beg the question — if streaming is so bad for the music industry, then why invest in it?
Meanwhile, even the smallest labels yanking their content is bad news for consumers, because it turns a service that has everything into a service that has “most stuff” — that’s a life-and-death difference to a hardcore music fan. Surveys have suggested that fans are still very wedded to the ownership model and that the chief reason for that is that they have no confidence that their favourite album might not just disappear. If Spotify can’t stem this tide, then that lack of trust might well be what finally does the Swedish streaming service in.
Perhaps, as PaidContent’s Robert Andrews argues, it’s time for some transparency on music streaming rates.
Source: Wired.co.uk