Why Taylor Swift (and a lot of people) are Wrong About Spotify

In November of 2014, Taylor Swift removed her catalog of songs off the popular music streaming site Spotify on the grounds that it does not compensate artists fairly for their work. She wasn’t the first person to object to Spotify, Radiohead’s Thom Yorke being another notable opponent, but she has more or less become the poster girl for resistance to Spotify. The common arguments against Spotify are various: according to Swift it creates the perception that music isn’t valuable because people listen to it for free. According to Yorke it pays artists a pittance while steaming owners get rich, and many believe it will be the end of the music industry as it hurts traditional music revenue sources.
I’m here to tell you that not only is Spotify in the right, but also that it may well be the future of the music industry.

First, what is Spotify? It is a music streaming site started in Sweden in the early ‘00’s; unlike most other music streaming sites Spotify has a “freemium” tier where non-paying users can listen to any of Spotify’s 25 million+ songs for free with ads. Upgrading to Premium for just $9.99 a month will allow listening without ads, better sound quality, and allows users to download playlists to their phone or computer. The way Spotify pays artists is like this: users listen to songs, with a few fractions of a cent being put paid per listen. At the end of the month all the money earned by listens is put into a big pot which is then divided based on who was listened to the most; that money is given to the rights holders who make sure it gets in the hands of music companies and artists.

Now, as Tim Worshall at Forbes points out, it is important in this debate to define what a Spotify play is—it is the performance of one song to one person one time. Thus it is more proper to compare Spotify streams to radio plays; using this method Worshall found that Spotify pays about sixteen times as much as radio. That is actually pretty good, considering how (relatively) small Spotify is. Spotify has about 65 million users last count, which is pretty small, compared to Itunes half-a-billion users and Youtube’s one billion monthly users. The fact that Spotify has paid out more than two billion dollars to the music industry with this user base is downright admirable and certainly makes one think about how much money streams will make when/if Spotify gets one-hundred million paid users. Spotify’s team has been insistent that their “freemium” tier is essential to building a large subscriber base.
Also, keep in mind that due to their focus on building a customer base, Spotify has been reporting annual losses of 60-70 million dollars for years. I’d hardly call that getting rich at artists’ expense.

Although at the end of the day, Spotify is not necessary supposed to be an artist’s sole source of revenue; it is rather a discovery tool and a way to make free music profitable for artists.
Way should free music exist at all? Because, of the evil known as piracy; Spotify’s founder Daniel Elk specifically created Spotify with the intention of defeating piracy by creating a free listening system that actually compensates artists for their work. This is a task it has done admirably; some studies suggest that in areas of Sweden where Spotify use is more prevalent, piracy is less prevalent.
Ben Berry of up-in-coming band Moke Hill wrote a wonderful article, where he shows that Spotify gives hope to new musicians by giving them a chance to be noticed and listened to. Taylor Swift argues that her opposition to Spotify (and to an extent streaming in general) is for the good of new artists who don’t have her prominence. Well, the long and short of it is that the end of streaming won’t hurt established superstars like Swift, but it will make it much harder for new artists to break into the industry. Once a band gets on someone’s radar, their fans will then buy their music or see them on tour; because of course touring is nowadays an artist’s most significant source of revenue.
One thing that should be noted is that artists are not getting as much revenue from streaming as they should for the simple reason that the money is still split about 70/30 between record labels and musicians. This was probably fair in the days when record companies had to spend huge sums to produce large album runs, but since the physical medium is more or less dead why then do record labels still take so much of an artist’s revenue? Lawsuits have been filed by artists in order to get a fairer chunk of their streaming dues.

As to Swift’s claim that free music creates the perception that music isn’t valuable, arguing instead that music is worth as much work is put into it, this is simply an economic fallacy. It is an economic principle that goods are worth what consumers will pay for them not the labor put into them.

All that being said, it would be unfair to not mention one of the several valid criticisms of Spotify. “Freemium may indeed be”, well, too free and therefore not give listeners enough incentive to switch over to the paid service. I might suggest increasing the frequency of ads, but one must be cautious not to make “freemium” so restricting so as to force people back to piracy.
Either way, a great change is happening or rather has been happening in the music industry, a change toward streaming. But Swift’s and her allies against streaming will only hurt new artists chances of making a living in this new music business, while they can afford to oppose change and stay on their lofty statures. Spotify is not the death of the music industry it is arguably its best hope.

Bibliography/Suggested Reading:

Why You Shouldn’t Feel Guilty for Using Spotify” – Charles Ubaghs, The Quietus
Rockonomics: Spotify versus Itunes, when are streams-over-time worth as a sale today?” – David Touve
Spotify didn’t kill the music industry you did” – Prentice Mathew
Taylor Swift Doesn’t Understand Supply and Demand” – Nilay Patel, Vox.com
The Truth about Taylor Swift and Spotify” – Music. Licensing, Youtube.com
Taylor Swift is Fighting the Wrong Part of the Music Industry” – Jonathan Ford, Financial Times
Concert Photographer calls out Taylor Swift for “hypocritical” Apple Open Letter”

Also, here is an interesting post over at Spooky & the Metronome, here at WordPress, about how streaming is merely continuing the legacy of music lending libraries popular in the late nineteenth century.