IT’S NOT SPOTIFY’S FAULT YOU MAKE SO LITTLE MONEY

In the last few days, chatter has grown in the indie community about pulling releases from the new (to the U.S.) music subscription service Spotify. The complaints largely stem from miniscule royalty checks at lower rates than majors receive. Spotify has responded to the complaints but that only seems to add fuel to the fire. What is the real issue?

The real issue is one of volume. Nearly all indie artists don’t have it. Judging by Spotify’s 100 Most Played, most people aren’t coming to the site for indie artists as only about 10% is independent. Indies complained about unfair payments in retail in previous decades, so this issue isn’t new. The only way to increase your leverage for better rates, as it is in any other industry, is to increase your demand. The major labels do an excellent job of this, which is where their higher rates stem from.

When an artist complains that their Spotify royalty is only a couple of bucks, what is an increased rate really going to do? Double a $2.50 royalty statement to $5? Is that really making a difference in a bank account? Those that complain are obscuring the true issue about the quality of their music. The lack of repeatability and marketing to drive demand causes low usage that results in low royalties.

Let’s take repeatability. Previously, indies did OK because they created some buzz around an artist that resulted in a CD sale. That album would then be listened to several times, but most of them really never received more than a dozen or so listens. I look around my home office and see hundreds of indie albums I own that I never listened to more than 5 or 6 times. Look at your iTunes play count and see how many indie albums you have truly listened to more than that. It’s not many. Many of these albums were good albums too, and I still think positively about them. But I have no emotional pull to listen to them again. From a consumer perspective, I used to essentially pay a high premium for that privilege by purchasing, but I really was unable to extract the true value because I never listened enough.

Now in a changed world of Spotify and other services, we no longer have to pay that premium. This means that the music has to be good enough to warrant repeat listens. Not just repeat listens while it’s new and hot, but repeat listens over time. So is Spotify to blame because the music doesn’t generate sufficient volume of listens? It’s crucial that an artist and label collaborate to make music that requires multiple listens.

Then one has to look at marketing needed to know your album even exists. Rdio has THREE THOUSAND releases in their new release section just for this week. There are only 10,080 minutes in a week. Do the math. If you didn’t sleep, you would have time to hear only one song per new release. AND listen to that song only once. This is intense competition. With that volume out there, it should almost be a point of pride if you take in five bucks. If you’re not making people aware that your music is out there, it will go unlistened to. I didn’t know the band Uniform Notion existed until they complained they weren’t getting paid well by Spotify.

So, it’s a free country, and you could choose not to be on Spotify. The issue is that you then encounter the one thing worse than getting paid peanuts and that’s obscurity. People want to be entertained by music, not have to hunt things down. It has to be easy, which is why Spotify has gained so much traction. If you manage to get an average music fan’s attention on your band (out of the THREE THOUSAND others that released something that week) for 2 seconds and they look on Spotify and it’s not there, do you know what they do? They move on to another song. And you’ve lost your chance of gaining a fan. And the royalty. The number of people who would then spend time searching for alternative listening methods is miniscule.

When I first published Futurehit.DNA a few years ago, I detailed the techniques you needed in this song for this very reasons. Songs moving forward will make money by its repeatability, not its buyability. Believe me, if you and/or your label had songs with significant volume of activity, I’m pretty certain you could exercise that leverage for increased royalty rates. I wish I could tell you life is fair, but did you make the same money in a club as the opening act that the headliner did? Could you charge the same for a T-shirt as the headliner or did you have to cut your price to be competitive? The music business is full of these inequities. The only surefire way to justify getting the most money is to be great and have the audience to prove it.

Albums with one good song on it are no longer money makers. Songs with one good listen in them aren’t either.

4 Responses to “IT’S NOT SPOTIFY’S FAULT YOU MAKE SO LITTLE MONEY”

  1. Mike M September 21, 2011 at 5:39 pm # Reply

    Don’t agree with all of this, but the general message is right.

    Unfortunately, even with repeatability, you can’t expect to make much on Spotify. The real value lies in the fact that someone is giving you their precious time out of their day to give YOUR band a listen. That’s powerful.

    I wonder what the gross income is from fans who discovered an artist on Spotify and went to their show? What about bought some of their merch? Told a friend about the band? That’s a true fan conversion & there’s infinite value in that.

    I actually wanted to post this comment, though, to say that Uniform Notion wasn’t complaining, to be perfectly fair. They were just stating the facts.

  2. bobDobbs September 23, 2011 at 9:13 am # Reply

    In a Spotify world, bands better learn to tour and play live constantly or they have no chance of making a living. Selling product via the Internet is largely becoming a non-option.

  3. Hypebot Hater December 6, 2011 at 6:13 pm # Reply

    THANK YOU. For finally saying this, thank you.

  4. Fred January 26, 2013 at 11:28 am # Reply

    I think he brings up a good point- that one of the signs of the times is that a lot music made today is simply is not compelling, interesting, or good enough for anyone to hang their hats on. It’s become increasingly easier for people to record and sell music- so the internet and the market is flooded with stuff. Most of it is beige, or too reliant on superficial image to be worth much of anything, or simply bad. A lot of it is good- but it’s a needle in a haystack.
    I do wonder about major label artists/established music legends-how much do they get paid? I suppose it depends on a deal the label got for them, but I’m curious to know how much they get.

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