Spotify and the Future of Music Ownership IDIA 620 December 6th, 2011 Malcolm Kemeny
• Massive online jukebox – access to over 13 million Songs• 10 hours/month with ads for free• $9.99/month unlimited ad free music on desktop and mobile devices• “Built to be social”. Shares listening data with Facebook friends, account management done through Facebook.• Integrates automatically with existing iTunes library• First application of its type to gain serious market share. Over 2.5 million subscribers in the U.S.
Why is Spotify Important?• Completely different from Pandora, traditional radio models. All music is on demand and tailored to the user.• Instant, Effortless sharing and suggestion – “Spotify and Facebook have come together to help you discover more free music than ever before”• Easier than stealing – “When it’s free and easy to listen to music on Spotify, who needs piracy?”• Rent music rather than pay. Every month you pay $10, if you stop paying your music disappears.
How is this possible?• Four record labels together own 18% of Spotify in the US.• It is better for them to get a little money from streaming than none from a user who finds the music on YouTube or through P2P networks.• A popular song has a steep demand curve, more beneficial to get all the plays possible before it loses popularity.• Incredibly accurate usage data is reported. When you play a song, Spotify passes along to the record label your • Age • Location • Gender • Streaming History
STHoldings “Let’s keep the music• Distributor for 238 Grime, Punk & special, fuck Dubstep labels Spotify”• November 2011 –Pulled all music from Spotify • Artists were paid unfairly for plays • ≈ $.0041 per song played • ≈ $.04 per album • People who heard music on Spotify were less likely to purchase the album • ≈ $7 per album revenue if purchased through iTunes• Users who relied on and paid Spotify to hear those artists were suddenly out of luck.
Implications• For Artists – • There is no reason to list music on Spotify if it will reduce your album sales. • No guarantee that the people who subscribe are the ones who have been stealing. • Becomes even harder to make money as an artist. A platinum record heard only on Spotify makes the artist $40,000. • Devalues the individual song when it is sold as part of a monthly bundle.• For Consumers – • You know longer own your music. All your music is rented, someone else controls the content and can take it away for non-payment.• For Labels – • Users keep paying for music without gaining any ownership rights. Ensures payment over theft.