Bit Torrent Logic: How Spotify Brought on Their Own @TaylorSwift13 Problems

Is he mad? Anyway, there’s something on his mind, as sure as there must be something on a deck when it cracks.

Moby Dick, by Herman Melville

When you look at all the sanctimony that Spotify has ginned up about Taylor Swift’s withdrawal from the service, only the erudite Ben Sisario has put his finger on the real reason:

In the past, Ms. Swift has employed a “windowing” strategy for streaming services, withholding new material for a while to spur CD and download sales; Adele, Coldplay and Beyoncé have done the same. With “1989,” however, Ms. Swift and her label, Big Machine, went further, removing her entire catalog from Spotify and putting the streaming service on the defensive.

The dispute with Spotify — whose pitch to subscribers is largely based on its ability to deliver the music people want to hear — appeared to have arisen from a disagreement over how her music would be offered there. Spotify has both free and paid tiers, and Ms. Swift and her label wanted access to her music restricted to its paid version, which provides higher royalty rates.

Spotify denied this request, so last week, Big Machine asked to have her entire catalog taken down, according to three people with knowledge of the discussions who were granted anonymity because the talks were private. In a statement this week, Spotify defended its business model and said that Ms. Swift was welcome to return….

Other streaming outlets like Rhapsody, Beats Music and Google Play Music All Access have kept Ms. Swift’s catalog, because they agreed to keep her music out of free tiers, or offer only paid versions. (emphasis mine)

Naturally this issue was clearly disclosed in Spotify’s first blog post on the subject, right?  No, actually not a word.

On Taylor Swift’s Decision To Remove Her Music from Spotify

We love Taylor Swift, and our more than 40 million users love her even more – nearly 16 million of them have played her songs in the last 30 days, and she’s on over 19 million playlists.

We hope she’ll change her mind and join us in building a new music economy that works for everyone. We believe fans should be able to listen to music wherever and whenever they want, and that artists have an absolute right to be paid for their work and protected from piracy. That’s why we pay nearly 70% of our revenue back to the music community.

PS – Taylor, we were both young when we first saw you, but now there’s more than 40 million of us who want you to stay, stay, stay. It’s a love story, baby, just say, Yes.

No, Spotify pushed out squid ink about “building a new music economy.”  Not by converting ad supported users to subscriptions as it turns out.  No, the “new music economy” that Spotify has in mind is the free service.  Because that’s why Spotify blew the deal.  And it is this obsession that is going to be Spotify’s downfall.  Well, call me Ishmael.

daniel-ek-spotify-ceo-2012BilloardSPOOF 2

So let’s get this straight.  When it first started, Spotify induced artists to take an extraordinarily bad, non-transparent and unsustainable royalty deal on the free service with a promise–Spotify will move users to the premium service quickly because the the free service pays those horribly low royalties with no minimums.

How might you get users of the free service to take the premium service?  Here’s an idea.  Give them something they want that they can only get on the premium service.

You know, like a hot new album.  You know, like, oh, I don’t know.  Taylor Swift comes to mind.

That approach certainly made sense to all of Spotify’s competitors, but not to the Cult of Spotify.  No, the Cult of Spotify wanted it their way or the highway, and they were so sleazy about it that they would not respect the artist’s wishes when she said no.  Then they were REALLY sleazy by launching a PR campaign against her without disclosing to their buddies in the press that the problem that Spotify has with Taylor Swift is one of Spotify’s own making.  

So why would Spotify do this…to…drive…up…premium subscriptions?    Wouldn’t you think that Spotify would want to take the same deal that all their competitors took?  If that the point was paying higher royalties on the premium service?  I mean, selling subscriptions?

What would make it worth the risk of attacking an artist in public because she wouldn’t take the hillbilly deal?

I have no idea what the brain trust at Spotify came up with to justify this cult-like public shaming on a level we haven’t seen since Napster (with the possible exception of Bob Lefsetz’ attacks on Lily Allen).  But if I were going to play “Name that Fear” for Spotify, here’s one that seems to fit.

What if they all did it?

And by “they” I mean all the big releases?  That would be logical, right?  People at labels will say, “I want more of that” because their jobs depend on actually selling stuff.  They have to justify marketing campaigns for the new releases.  And what drives users to streaming services is the marketing campaigns behind the records that the artists record and market.  And that marketing spend is justified by sales.  It will never be justified by royalties from the free service at Spotify (or Pandora for that matter).

If Spotify can’t convert those users to premium subscribers fast enough to justify the marketing spend on the records that Spotify needs to compete, then remember this:  Nobody owes Spotify a living.  The other services seem to be able to cope with this situation just fine, maybe because they understand the basic rule:  They need hits, and hits don’t need them.

So if artists begin thinking that they want to do what Taylor did and just release their titles in the premium services, then the labels will begin to have an artist relations problem, which is always a good reason to not do something.  Particularly if the thing you’re not doing is economically stupid in the first place and the artists–your partners–are correct.

The next logical step after pulling all new releases from the ad supported services is to pull all releases from the ad supported services.  And if I had to guess, that’s what’s driving Spotify’s orchestrated attack on Taylor Swift (and why Google would be happy to use Spotify as a stalking horse, but that’s another story).

We can be glad that there are actual..whatchamacallit…journalists, that’s right.  That there are actual journalists like Ben Sisario who actually get the story and don’t just write the press release.

It is also not to be forgotten that Big Machine did an excellent job of working the take down notices which essentially made piracy more manageable on the “1989” title.  So if the reason that Spotify gives for even having the free service is largely managed, then why use the free service at all.

For anything.

And if Spotify doesn’t like where this is heading, then they need to find a new gear on that premium service conversion problem.

This experience also raises an issue for another “exposure” enthusiast, Pandora.  More about that later, but one would think that the CRB would be interested in knowing what happens in the market when an artist doesn’t take the hillbilly deal.

So the Cult of Spotify has now created yet another problem for themselves after the string of artist relations debacles on what was to have been a charm offensive tour in New York, Nashville and Los Angeles.  Who would want to do business with some tech company that attacks artists when the company doesn’t get its way?  Sounds like Bit Torrent logic to me.

PS After posting this, I found a great piece by Stuart Dredge on Music Ally that also correctly identifies the issue.

3 thoughts on “Bit Torrent Logic: How Spotify Brought on Their Own @TaylorSwift13 Problems

  1. So, the point is, if the party animals over at Spotify can’t give away Taylor’s hard-earned copyrighted material for free, where Spotify makes all the money, they will try and guilt her and her fans into demanding she come back to Spotify.

    Taylor Swift just took Spotify’s 8-ball and put it in the corner pocket.

    How does it feel to really be behind the 8-ball Spotify?


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