Spotify: to charge or not to charge?

Could Spotify save the music industry from the evil grips of music piracy? The possibility is not unlikely, according to the company’s 2014 subscriber figures, which were released Jan. 12.

The Swedish music-streaming company boasted 15 million paid subscribers and a combined total of 60 million active users (free and paid) by the end of December. The number of paid subscribers is three times what it was two years ago, according to The New York Times.

Spotify is a free music streaming service that, unlike Songza or 8tracks, lets you listen to songs on-demand. For free subscribers, the service comes with ads, but for people who pay the $9.99 monthly subscription fee it offers higher quality recordings, more access to content and ad-free listening.

The company, which is reportedly worth $3 billion, has paid out $2 billion in music royalties to the music industry since starting up in 2008. It has provided a revenue stream that has otherwise been decreasing thanks to illegal music downloading on the internet. But Spotify, as an alternative to pirating, is a hit-or-miss with artists.

Toronto’s Scott Helman is a pop artist signed by Warner Music Canada who released two EPs on Spotify last year and is a diehard fan of the music streaming service.

(Courtesy  WOLF LΔMBERT, Wikimedia)

The music-streaming website has 15-million paid subscribers. (Courtesy WOLF LΔMBERT, Wikimedia)

“There was a void in the industry — something that the record labels and the people that were selling music weren’t providing consumers with, on account of the Internet,” he said. “Unfortunately, there was nothing we could do about it because people were going to download music anyway. So I think that Spotify is a creative alternative to that problem and they provide something to fill that void where artists do get paid.”

Artists do, in fact, get a cut of the payout. However, some feel that the money they are receiving is not enough. This issue of insufficient royalty payout came to the forefront in November when pop musician Taylor Swift announced that she would not be releasing her latest album, 1989, to the streaming service and that she would be removing her entire catalogue from Spotify.

“She is a massive artist and she has to lead by example,” Helman said. “I think she saw that there wasn’t as much money in it as there is off iTunes or radio or touring, and she would rather that people download it illegally and she will still make money on iTunes and CD sales.”

He added that he feels that Swift’s choice put a strain on the music industry, making it seem like she thinks she’s above everyone else in the biz.

In an opinion piece in the Wall Street Journal, Swift claimed that there is an inherent value she puts on her art and she felt that Spotify doesn’t do enough to convert free users to pay subscription fees.

Spotify founder Daniel Ek stated in a Music Business Worldwide article that the current company strategy is not to try to increase paid subscribership, which has stayed flat at 25 per cent since September of 2012, but to get as many people as possible to transition from illegal downloading to Spotify’s free service. He said he believes that doing this will soon result in more paid subscribers.

Ryerson creative design grad Aaron Mohr had his music on Spotify when he was a part of ambient band The Electric Environment. Though the band has since split up, it’s self-titled EP found its way onto Spotify when it was shared by a third-party group.

“I think it does offer a fairly good alternative to illegal downloading, but with that being said I feel like I’m always hearing about artists being completely ripped off by these websites,” he said.

“I am kind of cynical when it comes to the issue because, as sad as it is, I think that music recordings have kind of lost a sense of value to a lot of people due to the rise of illegal downloading. Unless there is some sort of big change, I don’t think there is any way artists can really make money off of simply putting out recorded music.”

Steven Ehrlick is an assistant professor at the RTA school of media. Before coming to Ryerson, he was vice-president of legal and business affairs for BMG and EMI Music Canada, and co-founder of The Orange Record Label under Universal. He finds Spotify’s royalty payout plan to be quite fair.

“I don’t have as much of a problem with it as Taylor Swift does,” Ehrlick said, “They pay 69 per cent while iTunes pays 70 per cent.”

As for Helman, he said that although the pay from Spotify may not be the greatest, with new subscribers coming in, it has the potential to change.

“The argument that artists aren’t getting paid enough is related to the idea that there are just not enough people using the paid Spotify yet,” he said. “But I think the free version is better than having people download music so … the more people to hop on these streaming services the better, and stronger they will become and the more they will be able to pay out.”

This story was first published in The Ryersonian, a weekly newspaper produced by the Ryerson School of Journalism, on Jan. 21, 2015.

By Luke Williams

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