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Spotify CEO shoots back at Taylor Swift, and he has a point

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Spotify responded on Tuesday to a high-profile diss from Taylor Swift, who last week yanked her entire catalog from the streaming music service, saying she didn’t want to to perpetuate the idea that “music has no value and should be free.”

In a blog post, CEO Daniel Ek pointed out that the company has already paid out more than $2 billion in royalties to artists, and says that the alternative to services like Spotify is piracy and “zero” dollars for musicians. Ek also took issue with what he called “myths” about streaming music, and made a good case for why services like Pandora and Spotify are scapegoats rather than the sources of the music industry’s problems.

Here’s a short summary of the “3 myths” Ek described:

  • Myth 1: Free music means no money for musicians. Ek said that “free” services like Spotify actually earn large amounts of money through ads, which are passed along to artists. He also claims that the ad-supported free services lead listeners, including many young people, to pay for subscription versions too.
  • Myth 2: Spotify pays such a pittance that no musician could make a living from it. On this point, Ek took aim at those who make apples-to-oranges comparison between individual streams — which reach one person — versus AM/FM radio plays that reach thousands of people at a time. In other words, the rate per song play is low on streaming services, but the number of plays is infinitely higher. He also pointed out that digital music services pay performers (in addition to song writers) while traditional radio pays them nothing.
  • Myth 3: Spotify is killing downloads and CD sales. Ek pushed back against the idea that Spotify is causing sales from iTunes and retailers to decline. He claimed that sales will decline with or without Spotify, and pointed out the similar declines are taking place in Canada, where Spotify was not available until a few weeks ago.

In my view, Ek is right and Taylor Swift is wrong. Services like Spotify aren’t to blame for the struggles that musicians are facing, but instead represent a potential lifeline. The fundamental problem facing the the traditional music industry is that labels are no longer able to control the distribution of songs and command premium prices through physical media like CDs. As long as the internet is here, their old business model is not going to return.

Ek put this unpopular truth another way when he wrote, “In the old days, multiple artists sold multiple millions every year. That just doesn’t happen any more; people’s listening habits have changed – and they’re not going to change back.”

While a handful of artists like Swift can sell millions, they are an exception because they possess a unique star power that lets them do things like pull their catalogs off Spotify. While any other musicians can, of course, do the same, it would mean forsaking money and exposure — without attracting the same media attention that Swift’s decision received. (As it turns out, Swift’s stunt was likely less a point of principle than a marketing coup and a way to inflate the value of her music label.)

None of this is to say that musicians don’t deserve more money — I feel for the local bands I see in Brooklyn, who not only have little hope for making a living from their music, but are also tethered to crummy jobs without health insurance.

But the “solutions” proposed by the music industry, such as imposing an oldies tax to give windfalls to the likes of the Turtles, won’t do anything to help those young musicians. A better way forward might be to find a way to allocate Spotify’s $2 billion directly to musicians, with fewer lawyers and middlemen, and to encourage services like Pandora’s “data dashboard” that make it easier for musicians to find their fans.

If you care about music, don’t worry about Taylor Swift — hope instead that Spotify can stick around.

31 Responses to “Spotify CEO shoots back at Taylor Swift, and he has a point”

  1. Drew White

    Poor journalism. Spotify don’t pay artists, publishers or writers. They pay record labels and (to a far lesser extent) writer/publisher collection agencies. If you don’t understand there is an incredible difference between what labels receive and what artists or writers receive you don’t understand the industry and shouldn’t be writing about it.

    Incidentally the ratio of label to publisher payments can also be 95/5 which is quite staggering. Spotify colluded with labels to set up a new lifeline for a dying and virtually redundant industry, but labels don’t control songs (hence needing permission from the publisher to publish lyrics on a CD cover). As usual there is a huge amount of glossing over cracks in what Ek says.

  2. Roger Klorese

    Or, in other words: pirates have stolen your breakfast, lunch, and dinner, so be happy we’re giving you a one-inch cube of cheese, and modify your metabolism to live on it.

  3. TS is assuming spotify users are most likely free-subscribers!? I dont know whether its true or not,but Spotify is NOT wrong and its TS’s right to pull off her songs. But instead, she should pull off her songs from youtube/vevo/soundcloud/and the likes also, if she thinks she wants to be “fair” to herself and her fellow musicians!

  4. Sean 'Wordpress Guy' Vosler

    reverse the funnel.. get the music to as many ears as possible, then sell the concert experience. I’ll pay $50+ for a ticket to band/singer that I really love (heck paid $100+ to see michael buble because Im a big fan)… Engage with fans, let the music act as the “leads” to the concert.

  5. “I feel for the local bands I see in Brooklyn, who not only have little hope for making a living from their music, but are also tethered to crummy jobs without health insurance.” Why is this sentence in the article? If they don’t like their jobs, they can “untether” themselves and get a different job, Just like anyone else. This sentence needed to have the words “not only” removed and end at the word “music”.

  6. Josh Chen

    So either gigaom is favor to Spotify or it’s slow, Techcrunch has already reported “Taylor Swift Would Have Made $6M This Year On Spotify (1989 Pulled In $12M In 1st Week)” yesterday.

    $12M a week (of course, she would only get part of this) against $6M a year, that is a very big difference to me, I totally understanding the current way to sell music is not the best, but please consider Ms Taylor Swift is a singer, and her career will be ended when she is aged. Therefore, her goal is making as much money as she could right now, not in the future (experiment) that she can’t control.

  7. The argument that Ek (and others often) make: “It doesn’t matter that my service doesn’t pay much since otherwise the music (or whatever) will be pirated.” This strikes me as specious at best: Because people can steal BWM’s, does that mean their legal price should be $5? Taylor Swift should decide how her music is distributed (or not.)

  8. Not touched on in Ek’s statement (or this article) that I took major issue with is that, based on Taylor Swift’s argument that Spotify is a “grand experiment”, I guess entertainment streaming services like Netflix and Hulu are also just grand experiments and not a technological reality to provide wider access to entertainment that otherwise would be exponentially more difficult to get (at least legally). I’m sure Taylor enjoys streaming her favorite shows and movies, what would cause her to believe that her entertainment product is any more valuable than those of acclaimed directors. I expect this from older artists who don’t fully understand or see potential of new technologies that Taylor grew up with. Considering her age, the dichotomy and shortsightedness of her argument is disturbing. I am certain she will reverse her stance eventually as her brand equity begins to fall (as it inevitably will). Shame.

  9. Spotify has actually allowed me to discover artists I would never have found through other types of streaming services. I see that as a win-win situation for both the listener and the musicians. Taylor Swift is able to pull out from Spotify because she’s already making millions regardless of where her music is available. Other artists might never see the light of day if it weren’t for Spotify. A number of trance musicians are probably wondering why their 90’s Goa tracks are suddenly getting an increased number of plays…and I can only thank Spotify for that.

    Musicians are lucky they have Spotify. If you’re a fine artist or photographer and someone gets ahold one one of your pieces and posts it on Tumblr…you’re not getting any “viewing fees” at all. At least musicians can get “something” out of it.

  10. Would be nice if they revealed the ownership by large labels in Spotify who will reap a fortune when the stock goes public and the artists and writers will get nothing. So big conflict of interest when a label encourages their artists or demands they go on streaming.
    Spotify, open up about all the side deals you have made and have not made with the Labels. The Labels get 7 to 9 times more than the writers but pay the artists 13%, then have ownership in Spotify.
    Let’s start talking about that.

  11. Ian Lamont

    “I really want artists to understand: Our interests are totally aligned with yours.”

    Spotify’s interests are not totally aligned with artists’ interests. Spotify’s interests are aligned with record labels and assorted middlemen, advertisers, and investors like Sean Parker, Li Ka-shing, KPCB, Coca-Cola, Fidelity, and others who want to see a big payout on their $500+ billion investment. Artists get lip service when they complain, and at the end of the day, the scraps after everyone else has taken their cuts.

    • Then why don’t they form a consortium that provides what the listeners want (streaming a la Spotify) at rates that make sense and without middlepersons (no sexism here!) to extract rentier profits. Spotify makes it easy, convenient, quick, transparent to listen to what I want to hear. I’d pay more to get the same but I don’t want to have to try to figure out where to go to hear what I want. If I could get that by going to the “Musicians and Performers United” site and have my $8.99/month or whatever go to the artists, I’d do it. You don’t need what you used to need to produce and distribute music, if artists want production and distribution done in their benefit, they can do so. Further, when I pay $150 for myself and another $150 for my wife to see an artist from mediocre seats at a venue and get asked to pay $35 for a t-shirt that some 9 year old girl in Malaysia sewed from cotton picked by a tenant farmer, it’s hard for me to say “boo hoo hoo” for them.

  12. “fewer lawyers and middlemen, and to encourage services like Pandora’s “data dashboard” that make it easier for musicians to find their fans.”

    Ding ding ding. I have no problem paying the artist but I am DONE DONE DONE paying the bloated “do nothing” Industry!!!

    I dare the music “business” to be transparent. Let see where it all goes and how pissed the artist and fan are when the numbers are told!

  13. The problem is that so many entitled millennials feel that they should be able to get for free that which was previously paid for. You like a song, pay for it…simple as that.

    • But that is the problem with the current system. The internet provides so many avenues to get music for free/reduced prices, so what are the incentives to purchase music straight from the artist? People do not feel inclined to help out the artists by sending them their money, so therefore new artists (singers like Taylor Swift don’t have to worry about this anymore) are slowly being weeded out due to the fact that they are not making enough money to support the career that they have chosen

      Spotify may give them recognition, but it does not get people to buy their music. If people can already listen to it online for $5 a month, again, what is the incentive to purchase the album at the full price?

  14. Zach Tirrell

    From Ek’s post:
    “At our current size, payouts for a top artist like Taylor Swift (before she pulled her catalog) are on track to exceed $6 million a year, and that’s only growing – we expect that number to double again in a year.”

    Must be nice to be a big enough artist to pass on that sort of money.

  15. Streaming services like Spotify arbitrarily set prices for content by charging a fixed, all you can stream monthly price. Why do they get to decide, and not the artist?

    They may have paid out $2B, but a big chunk of that goes to labels, not artists. Also, that number is meaningless. What was the median payout? The average payout?

    It’s not fair to say that the alternative to streaming services is piracy. People did buy songs digitally, and still do, and it is the income from that channel that has decreased due to the streaming. Streaming is only attractive to subscribers because the price is artificially low. If you do the math, there is no way that an all-you-can stream service could ever generate the same revenue for artists that selling songs does – but only a powerful artist like Swift gets to make that choice.

    • Dan Gilliland

      The artists need to make their own labels. Radio is dead. I stopped listening in 1997 when San Diego’s 91X cancelled it’s 1 hr/week EDM mix show EarXTC. The reason I signed on to Spotify before it was available in the US was due to Armin van Burren. He offers over 20,000 tunes from his label. Over 99% have never been played on US radio. If listened to on ITunes it would cost me over $20,000.

    • Anyone can make beer. The thing is that a service like Spotify is an aggregator of music and artist, which enable a far more easier search and discovery by the user. How would you discover an artist if they were all streaming from their own digital properties?… Come on.

  16. Mounir Sita

    Spotify and Pandora (and thousands of other content aggregators) are nothing but middlemen. I call them value chain bloatware. Yes, we do need them today, but in the ideal world Swift will host her own music on her own servers and the network would have the intelligence to connect the right people to her music at the right time. No Spotify to take a big cut of whatever business model Swift chooses to incorporate.

    So I disagree with you on your last sentence. Let’s hope Spotify doesn’t stick around for too long. It hurts the real music industry which are the bands in Brooklyn to Taylor Swift.

    • Charles Lau

      I think your idea only works for singers who have big budgets or some creative ideas to gain market exposure for themselves.
      Through Spotify and radio stations, I got to know new songs along the way. If not, it will be viral songs online such as Gangnum Style.

    • I completely agree with your statement. Companies like Spotify are killing up and coming artists. Maybe Spotify works for medium to major artists, but new artists will probably have a hard time either getting people to listen to their music, or do anything after that: say, go out and buy their music straight from the artist. With a middle man like Spotify, up and coming artists are losing hopes of sales.

      And it isn’t completely the fault of companies like Spotify. People no longer feel inclined to purchase music when they can get it “free” online from so many sources. What is really to blame for the loss of music sales is actually the internet itself, because it has made it easier for average people to find music for free/extremely reduced prices.

  17. Jeff those $2 billion represent what percentage of earning? or what amount of payment per play? it sounds like a lot but perhaps it really doesn’t add up to much to each artist. A better approach to your story and argument would have been to compare what an artist earns via Spotify and what they can earn via album sales, downloads via itunes, direct, etc. I suspect that not all artists are happy with what they earn per play on Psotify, no?

    • Charles Lau

      I think it is not the right argument to compare Spotify and album sales. That’s because Spotify provides exposure that album does not.
      Instead, I think you should compare Spotify and radio stations instead because these two are more similar model except that I don’t think radio pays anything to play their songs on air. Moreover, it’s more measurable to see the exposure you have reached for being on Spotify than on radio.

  18. I think this is no really a zero sum game Jeff, neither is “right” or “wrong”. Taylor has the right ton control her work, if she wants to distribute it a certain way and not another that is her right IMHO. I am a Spotify user and lover and while I would like all my favorite artists to be found there I support the right of artists to make decisions regarding their work and will continue to do so. I keep thinking back to the 50’s and 60’s where companies owned artists and their work and I tend to be rather sharply reactionary to artists losing the modicum of control over their work they have now. Let each artist chose where and how to present their work I say and let companies compete to commercialize the work they are able to gain control over. Free market at its best.

  19. The problem is perspective. TS view streaming as an experiment, not a future trend in the music industry, that is why she “is not willing” to gamble her career on an “experiment”. If she views it as an inevitable future, base on veritable data, her mindset might change. And pay artists more than the label…