Photo by Jenny Brown, used under Creative Commons.
The recent dust up between Taylor Swift and Spotify seemed to be about royalties but it’s really about something much larger. It’s about being able to recognize change in order to take full advantage of it.
Taylor Swift pulled her entire collection off of the music streaming service Spotify. Apparently she and her label are intent on not making her music available for free. As expected, Spotify CEO Daniel Ek responded in a rather extensive blog post. His claim is not only is Spotify not free, but artists make real money. And that the music industry is broken.
The thing is, they’re both right. When consumers don’t pay anything for access to music on-demand they perceive the monetary value as nil. The notion that consumers don’t think of free and ad-supported as the same thing is a fallacy. To a consumer, if it’s perceived as free, it is free. So, in that way Taylor Swift is right. If you send the message that your music is not worth paying for (“free”) then why on earth would anyone ever pay for it?
Couple that with the fact that smaller acts do struggle to make streaming a viable source of income (despite Ek’s claim) and it would seem Spotify is the devil incarnate.
But that logic is stuck in music label world of thinking. In the past, when a band got signed to a label, they were given x amount of dollars for which they had to record a set amount of records in exchange. The label would “borrow” from that contract total to pay for recording sessions and, of course marketing. Marketing that included print ads, TV ads, radio ads and, of course, on-air plays. Hopefully they would start to build a following. They would tour, audiences would grow and so on and so on (in theory anyway). Record labels, despite often sleazy business dealings, served a purpose. They did the promotion to radio stations and for tours and the big machine rolled on.
Fast forward to now. Music is streaming everywhere, all the time on-demand. all around the world. Record labels are in decline. The old system for success is dying right along with it. The downside is that now bands don’t have giant labels bribing…er, influencing radio stations to play music. The upside, however, is two-fold.
The first upside is that labels won’t be taking a majority of earnings to “recoup” their spending on marketing. Artists can keep more of what they make. And yes, for bands just starting out that means more of next to nothing. But that’s where the second upside comes in.
The second, and arguably more exciting upside, is data. By combining the data provided by music streaming services like Spotify and YouTube with the reach and power of social networks, it’s now possible for a band to target likely fans in a way they never could have under the label system. A band could even ostensibly pre-fund a tour via Kickstarter that targets areas that meet the “x” of audience size and the “y” of growth potential. That doesn’t even take into account the additional attendees and merchandise sales. And it would all be money they would get to keep rather than pay out to a label.
After I wrote this, legendary producer and musician Steve Albini have a pitch-perfect assessment on the “state of music”. Both Ek and Swift would do well to read it.
By changing how they think about the music industry, a band or artist can fundamentally change their trajectory and financial future. The bottom line is that instead of wasting time railing against a problem for what it isn’t, focus energy on finding a better way forward.
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