Is Spotify Bilking Recording Artists?

by Reihan Salam

Alt-music legend Damon Krukowski has written an essay lamenting the business practices of streaming music services. Specifically, he is appalled by what he sees as the very low per listen fees paid to recording artists. And he links these practices to a critique of the start-up economy:

These aren’t record companies– they don’t make records, or anything else; apparently not even income. They exist to attract speculative capital. And for those who have a claim to ownership of that capital, they are earning millions– in 2012, Pandora’s executives sold $63 million of personal stock in the company. Or as Spotify’s CEO Daniel Ek has put it, “The question of when we’ll be profitable actually feels irrelevant. Our focus is all on growth. That is priority one, two, three, four and five.”

Growth of the music business? I think not. Daniel Ek means growth of his company, i.e., its capitalization. Which is the closest I can come to understanding the fundamental change I’ve witnessed in the music industry, from my first LP in 1988 to the one I am working on now. In between, the sale of recorded music has become irrelevant to the dominant business models I have to contend with as a working musician. Indeed, music itself seems to be irrelevant to these businesses– it is just another form of information, the same as any other that might entice us to click a link or a buy button on a stock exchange.

As businesses, Pandora and Spotify are divorced from music. To me, it’s a short logical step to observe that they are doing nothing for the business of music– except undermining the simple cottage industry of pressing ideas onto vinyl, and selling them for more than they cost to manufacture. 

Krukowski’s essay sheds light on a deeper unease about finance capitalism, yet the indefatigable Michael Masnick has argued earlier on that his central premise, that services like Spotify are bilking recording artists, is faulty:

[T]he more you look, the more you realize that Spotify actually pays out quite a lot. A few months ago, someone at one of the music collection societies told me about an analysis they had done concerning the amount of money paid per listen – comparing Spotify to radio, iTunes and lots of other things. When you knock it down to a per listen basis, it turns out that Spotify pays a hell of a lot more than any of those other sources. It’s just that it’s incremental so it looks smaller. With iTunes, people pay per download, not per listen, so you basically upfront a certain amount of money and then no more money is ever paid for listening to those songs. With radio, there is (effectively) a per listen rate (outside the US if we’re talking performances), but it’s aggregated because it’s effectively spread among all the listeners. So, Spotify makes it incremental, and it seems small. but when measured on a per listen basis, the amount issignificantly higher (as in an order of magnitude) than other things. The other bit of confusion about this is that Spotify is still new, and it’s growing. But start from a small base, and it’s easy to be confused by small numbers. 

Moreover, Masnick suggests that another more pressing issue is that Spotify pays record labels rather than artists, though this is less salient in the case of Krukowski.