Spotify's Daniel Ek has responded to Taylor Swift and other critics in a lengthy blog post reigniting the debate prompted by Swift pulling her catalogue from free (freemium) streaming services. Ek begins by saying
"Taylor Swift is absolutely right" (referring to remarks the singer made in a Wall Street Journal and Yahoo interview) adding "Music is art, art has real value, and artists deserve to be paid for it. We started Spotify because we love music and piracy was killing it. So all the talk swirling around lately about how Spotify is making money on the backs of artists upsets me big time". Ek then detailed how the Spotify payment model works and revealed that Spotify has now paid out $2 billion to the music industry since launching in 2008, $1 billion of that in the last year and that Spotify now has 50 million active users, 12.5 million of whom are paying subscribers - an increase of ten million and 2.5 million respectively since the last lot of official figures released back in May of this year. However Ek somewhat failed to address why a relatively small share of these streaming royalties are shared out to artists once the money has left Spotify's bank account, not least as the labels who seem to be keeping the lions share of streaming revenues are key partners in his business, both as content providers and shareholders.
Ek says "The music industry is changing - and we're proud of our part in that change - but lots of problems that have plagued the industry since its inception continue to exist" ading "As I said, we've already paid more than $2 billion in royalties to the music industry and if that money is not flowing to the creative community in a timely and transparent way, that's a big problem. We will do anything we can to work with the industry to increase transparency, improve speed of payments, and give artists the opportunity to promote themselves and connect with fans - that's our responsibility as a leader in this industry; and it's the right thing to do".
Swift and her label Big Machine has pulled the singer's entire catalogue off Spotify (and others) seemingly because of those platform's freemium tier, which allows users to access music without direct payment. "If this fan went and purchased the record, CD, iTunes, wherever, and then their friends go, 'Why did you pay for it? It's free on Spotify', we're being completely disrespectful to that superfan who wants to invest", said Big Machine's Scott Borchetta last week.
Ek points out that, while consumers can access music at this level for free, the artist does still earn a royalty from each play their music receives a stream and compared that to terrestrial US radio station where labels and recording artists earn nothing for a play (although songwriter earns a royalty from American radio.). In other countries such as the UK both PPL (for labels and recording artists) and PRS (music publishers and songwriters) collect from radio stations. Undeterred Ek continues "Here's the overwhelming, undeniable, inescapable bottom line: the vast majority of music listening is unpaid", noting that Spotify's main competitors are radio, YouTube and piracy. "If we want to drive people to pay for music, we have to compete with free to get their attention in the first place". Spotify's free tier is vital to driving people to pay, he continues, saying: "More than 80% of our subscribers started as free users. If you take away only one thing, it should be this: No free, no paid, no $2 billion" - not least with a 14% global decline in download sales so far in 2014.
Ek also looks as Swift as a case study: "At our current size, payouts for a top artist like Taylor Swift (before she pulled her catalogue) are on track to exceed $6 million a year, and that's only growing - we expect that number to double again in a year". Ek added "People's listening habits have changed - and they're not going to change back" and "[Swift's] songs are all over services and sites like YouTube and SoundCloud, where people can listen all they want for free. To say nothing of the fans who will just turn back to pirate services like Grooveshark" (the 'pirate' label was subsequently objected to by Grooveshark) before concluding "The more we grow, the more we'll pay you", adding: "We're going to be transparent about it all the way through".
The UK's Music Managers Forum followed this by issuing a statement saying that the organisation is a "big supporter of streaming services", and suggesting Taylor Swift and her label are taking a short-sightedness for pulling her content from Spotify, although the MMF also hit out ar Non Disclosure Agreements that hide the deals between streaming services and the major labels. "Few markets are perfect and yes the 'low rate issue' has conflicted many, but above all, streaming services are a fabulous tool that connects artists and creators with fans", the statement reads. "No longer restricted by physical barriers, streaming gives a voice to those that want to be heard and a platform from which to build multi-revenue businesses that cross borders. There are no guarantees of success but the opportunity is there for all that want to give it a shot". Finally, the statement concludes: "Non Disclosure Agreements hide how the major music corporations license streaming services and we have grave concerns that the deals contain stipulations that both significantly reduce the amount artists ultimately get attributed and damage the growth of the streaming economy. The real fight is more likely between opacity and transparency, and we call on all major music corporations to take note and react in the best interest of their artists and shareholders".
Ek's blog post in full here https://news.spotify.com/se/2014/11/11/2-billion-and-counting/