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Zoë Keating Gives More Evidence of the Streaming Hyper-Efficient Market Share Royalty Headlock on Indie Artists #irespectmusic

December 17, 2018 Comments off

zoe tweet

 

Driving traffic to Spotify just doesn’t pay off for indie artists (or probably for smaller indie labels).  See an explanation of the Ethical Pool method as a possible solution.  Whatever we do, the status quo is not sustainable.

And then there’s this:

Spotify Buyback

@zoecello, @theblakemorgan, @themisreadcity, @thatkatetaylor at Global Forum on #irespectmusic, artist rights

May 28, 2015 Comments off

Once again, MusicCanada’s Global Forum at Canadian Music Week in Toronto gives a major platform to creators to discuss the human rights of artists and how to deal with the Silicon Valley onslaught.  This year featured a great interview by Kate Taylor of the Globe and Mail with Zoë Keating, Blake Morgan and Scott Timberg.  Watch the full video for the most insightful commentary on our struggle you’ll hear for a long, long time.  And consider this an invitation to sign the #irespectmusic petition and support artist pay for radio play!

image

Also big thanks to Toronto Mayor John Tory for showing his support for artists in Toronto and beyond!

And an especially warm homecoming show by Canadian born Zoë Keating, achingly cool memories for all who heard her.

The Revolution Shall be Monetized: Zoë Keating Confirms YouTube Learned Nothing From Indie Labels

January 24, 2015 2 comments

…there was lunch in the larger, first floor cafeteria where, in the corner, on a small stage there was a man, playing a guitar, who looked like an aging singer-songwriter Mae’s parents listened to.

“Is that….?”

“It is,” Annie said, not breaking her stride.  “There’s someone every day.   Musicians, comedians, writers….We book them a year ahead.  We have to fight them off.”

The singer-songwriter was signing passionately…but the vast majority of the cafeteria was paying little to no attention.

“I can’t imagine the budget for that, ” Mae said.

“Oh god, we don’t pay them.”

The Circle, by Dave Eggers

Once again, Zoë Keating provides a leading voice for artists rights and leads by personal example.  In her compelling viral blog post, “What Should I Do About YouTube,” Zoë describes a recent encounter with the demands of YouTube the definitive “new boss” monopoly video service owned by Google.

She asks her community for advice in making a decision about whether she should allow herself to be bullied by Google.  The “decision” that she must make crystalizes what my friend Rick Carnes (President of the Songwriters Guild) meant in the phrase he coined to describe how Google uses the DMCA: Notice and Shakedown.

Why is this an issue?  As Zoë tells us:

I am independent because I didn’t want a bunch of men in suits deciding how I should release my music. For 10 years I have managed to bushwhack a circuitous path around them but now I’ve got to find a away around the men in hoodies and crocs (I’m sorry, that was low, but that story was so funny).

Or as we say around MTP, meet the new boss, worse than the old boss.

Google is routinely and continually misusing the privileges that Congress provided in the now hopelessly outdated DMCA “notice and takedown” safe harbor.  If the 345 million takedown notices Google received last year alone for search alone doesn’t confirm that to you, Zoë’s description of the YouTube shakedown should make it crystal clear.

By telling her personal story, Zoë identifies adroitly the future of YouTube.  First, Zoë’s experience clearly demonstrates that Google learned nothing from its hugely bad press experience last year with the world’s independent record companies.

It also shows that Google fully intends to profit from the YouTube “bad acts” window–the period of time from when a video is posted and when Google ultimately take it down that gives “windowing” a whole new meaning.  This bad acts window is not limited to copyright infringement; it can include videos selling illegal drugs, recruiting young women into prostitution or young men into the jihad, demonstrating how to shoot heroin, sex tourist home movies, holocaust denier videos (illegal in many countries where YouTube makes them available), or plain old skin head racist videos.  MTP readers will require no citations for these videos, but if you are new to the blog just look under the “Bad Acts Videos” tab.

Moreover, Google’s treatment of Zoë is surely not limited to Zoë–it’s probably exactly what Google is doing to tens of thousands of artists.  If anything, Zoë probably got the star treatment version.  This is very Googlely–Google’s version of an “artist relations” team comes and tells you nicely how they are going to run roughshod over you (NP: Everything is Awesome).

Remember–the indie trade association IMPALA has filed an antitrust complaint against Google in Brussels over the way Google handled the MusicKey roll out which essentially involved the same deal.  So does Google say, that didn’t really work out too well for us, maybe we should handle it differently with the independent artists?

Nope–Google says, unfortunately, the indie labels fought back, but the independent artists cannot.  So Google says let’s screw them even harder.  As Zoë concludes her blog post:

What should I do? As much as it makes me grind my teeth, does having all my music forced onto Youtube’s music service really just not matter all that much? Should I just close my eyes and think of England?

Maybe after writing this blog Google will make the choice for me. They will block my channel and I will have to decide whether to block those 9,696 videos….and anger 9,696 fans. The usual people will talk about it for a day or two (*5) and then it and I will be forgotten.

Anyone starting up a new video service?

We’ll see.  Because what Zoë is really pointing to is the next step in the evolution of multichannel networks–leaving YouTube altogether and en masse.  Why would you want to drive traffic to YouTube for free when all they do is jack you around?  And speaking of “thinking of England”:

When I warned them that Britain would fight on alone whatever they did, their generals told their Prime Minister and his divided Cabinet, ‘In three weeks England will have her neck wrung like a chicken.’

Some chicken.

Some neck.

Winston Churchill, Ottawa, Dec. 30, 1941

Deep Thoughts from SF Music Tech

February 21, 2013 Comments off

The SF Music Tech conference ended this week, an excellent platform for Zoë Keating, more later about her ideas for online music services sharing fan data with the artists they exploit.  It was refreshing to see SF Music Tech continuing the theme started last year by David Lowery.  The usual old school “Deep Thoughts” kumbaya of the Barlow crowd is gradually being balanced out by real Bay Area artsts like Zoë Keating and East Bay Ray with real ideas about real issues.

Because if there is one thing that Big Tech’s brushes with the legal system tells us it’s that information wants to be anything but free.

The crotchety old school members of the Google Shill List are still partying like it’s 1999, however–and this live tweet from the conference by The Trichordist says it all:

T quote SF Music Tech

Yes, that’s exactly right–the money is there, it’s just going to “different places”–like brand sponsored piracy, for example.

lyrics007 adele pepsi

Rut roh…

It’s too bad that David Lowery wasn’t on a panel with Zoë Keating and East Bay Ray, that would have been quite a conversation.

PS Attention Australian readers, Zoë is coming your way next week.  You MUST see this artist.

The Inmates Are Restless: @zoecello’s excellent idea meets the fog of trolls and the Bundler’s Dilemma

November 21, 2012 Comments off

I always say that the great thing about the Internet is that it brings people together who would otherwise might never have met.  The bad news is that regardless of the Internet, the place they would likely have met is prison.  Who are these people?  You know–The Trolls.  Often corporate backed attackers leaving pre-digested bits of astroturf in the comments on well-meaning and heartfelt blog posts.

And so it is with Zoë Keating’s excellent point about data.  What has brought out the trolls this time is something more commercially debased than just copyright–it is that Ms. Keating has pulled back a little corner of the curtain that conceals the Great and Powerful Oz.

Let’s be honest–for the Great Troll Google, every aspect of their business is about collecting data.  This has held true from the Wi-Spy debacle, to the debacle of Google’s near-indictment for profiting from the sale of illegal drugs, to YouTube.  And since Google presents the Federal Trade Commission with the classic Bundler’s Dilemma (how does a Presidential appointee prosecute a company whose executives have raised millions for the appointee’s boss and who provided the data crunching for a successful campaign?), it is unlikely that anything will stop the Great Troll Google.  And Google is a good proxy for the other services, because the other services know that all they need do is let Google fight that one for them.

And if Google don’t share their data with the US Government–we assume–then does anyone think Google will share their data with an artist?  Even if that data solely concerns her fans and her music?

In a word–no.  Not voluntarily, anyway.  To paraphrase Arthur Jensen (in Network), you are meddling with the primal forces of nature, Ms. Keating, and you will atone.

And that is reason alone for The Man 2.0 to send in the gangs of Straw Men, the Categorical Imperatives and other members of the intimidation squad.  And of course no one knows this better than the Head Trollette herself, Jill  Hazelbecker–at least according to the New York Times.  (When Ms. Hazelbecker was caught trolling on New Jersey Democratic Party websites on behalf of her Republican candidate.) That would be the same Jill Hazelbecker, now the Head Trollette of Google a/k/a Google’s Director of Corporate Communications and Public Affairs.  I wonder what Google found most compelling about her qualifications?

So we should not be surprised that Ms. Keating has been slashdotted and trolled–that’s actually confirmation that she has a startlingly brilliant idea that will send a shiver down the backs of incumbents.

You know–disruptive.

A Great Question from @ZoeCello: Should Digital Retailers Own the Artist’s Fan Data?

November 19, 2012 Comments off

I want my data and in 2012 I see absolutely no reason why I shouldn’t own it. It seems like everyone has it, and exploits it…everyone but the creators providing the content that services are built on. I wish I could make this demand: stream my music, but in exchange give me my listener data. But the law doesn’t give me that power. The law only demands I be paid in money, which at this point in my career is not as valuable as information. I’d rather be paid in data.

Zoë Keating, What I Want From Internet Radio

Zoë Keating has raised a number of interesting points in a recent blog post about digital music services and one of them caught my eye–why is it that artists can’t get in the loop with the fans who buy or listen to their music?  When artists spend significant amounts of time and money trying to drive fans to purchase from iTunes or listen to their music on Pandora, Spotify or YouTube, why can’t these same artists connect with their fans who happen upon a track on a digital retailer?  (I may use “digital retailer” generically to include streaming services even though strictly speaking there’s no actual object being “retailed.”)

Or said from the point of view of property rights, why should the digital retailer own (or own exclusively) the artist’s property right in data relating to their works?  Since it is data created by the sale or transmission of the artist’s work for which the artist has spent time and effort to make valuable, why should that value accrue soley to the digital retailer?

As Zoë Keating says: “I want my data and in 2012 I see absolutely no reason why I shouldn’t own it. It seems like everyone has it, and exploits it…everyone but the creators providing the content that services are built on.”  That’s my emphasis, but I think that she sums up the problem very concisely.  (There’s a lot more to her post that you should read, but I’m going to focus on this one issue.)

The Land Grab for Fan Data

The main reason, of course, is that the digital retailer doesn’t want to share that information with anyone because it’s valuable.  I’m not talking about getting information about how many people in zip code 90210 bought your track.  I mean who bought it.

The retailer will no doubt say that simply handing over this information without the consent of the consumer would violate various privacy laws.  Yes, that’s probably true and also a very convenient dodge.  What I do not think would violate privacy laws would be if the retailer offered the fan a meaningful chance to sign up for the artist’s mailing list at the point of purchase or at the time of listening.

For example, if you are listening to Zoë Keating on Pandora, you are taken to a page that says “Frozen Angels” from “One Cello X 16: Natoma”.  You can “Share” or “Buy”.   If you click on the album page it’s similar stuff.

Same record on iTunes, you get “Artist Quick Links” which is all Apple-facing stuff:  “copy link” means the iTunes link, alerts are for iTunes, tell a friend let’s you send a link to iTunes, and so on.  And of course, you can share it on Facebook or share it on Twitter.

This is not just the template for an indie artist–the current AC/DC catalog promotion is essentially identical.

So why is this the case?

Sharing is Caring

What is so difficult about having another button–one that said “Artist Website” or “Artist Fan List” and either put a link to the artist website (which could be part of the track metadata) or a link to a signup for the artist’s mailing list.

The point of this, by the way, is for the artist to be able to capture the benefit of some of the traffic that they drive to Pandora, YouTube or to iTunes.  Sure, these big services can look down their noses at the indie artist, but how difficult would it be to implement?  They should welcome the opportunity to support the artists whose work profits them–particularly Spotify who pays jack in royalties and YouTube who spends as much time finding ways to screw artists as they do creating impossibly screwy royalty systems also designed to screw artists in ways that no old boss ever had the brass to attempt.

So we are not talking about a link to something that would drive traffic back to the retailer, or find another way to keep the artist’s fan on the Amazon site.  If you don’t like Zoë Keating, how about a nice salami sandwich?  Would you like fries with that?

No–having these sign up buttons would not be spamming the fan and would truly be sharing at least the most important data about the fan for the artist.  How to stay in touch.

I really don’t see the harm in this and I see tremendous benefit in affording artist and fan a chance to connect.  All at the fan’s choice.  Indie artists have a hard time getting any leverage over these retailers to negotiate better terms.  If we stick together, maybe one of them will do the right thing.

Since Pandora is asking for ever greater financial concessions from artists, maybe artists could ask Pandora for a non-monetary benefit of great value to the artist.  It would be help Pandora restore their tarnished image if they took the first step down this path.

If you agree, you can Tweet them @pandora_radio.

Updated: How Much Do Artists Earn Online? How Do Spotify and Other Revenue Share Services Calculate Royalties?

July 1, 2012 Comments off

I’d rather be raped by The Pirate Bay than shafted by Hasse Breitholtz and Sony Music.”
Swedish artist Magnus Uggla, speaking of Spotify’s major label ownership and low payments

He actually said something more emphatic than “shafted“, but this is a family blog.  You get the idea.  It’s in this graph courtesy of our friend Faza at  his most excellent blog, The Cynical Musician.

This 2010 graph may no longer be exactly correct on the number of streams at the Spotify end of the equation, but I think it is spot on–so to speak–on the relative numbers.  I think that the aggregate Spotify payout rate they use is a little low now, although it may well have been correct in 2010 when there were fewer premium service subscribers to Spotify.  The aggregate payout rate will skew higher as more users sign up for the subscription service over time (I’m focused on the total number of subscribers, not where they live, i.e., not the number of countries where the company operates).  But what really hasn’t changed is the general message of the graph–independent artists make a lot more money selling CDs and permanent downloads than they ever make on streaming services. This is not news. You can agree or disagree that streaming services do or don’t cannibalize sales of higher margin items, but it seems that you have to be completely convinced that “obscurity is your biggest enemy” and that somehow your being on streaming services solves for that problem sufficiently to make it worth the risk.

And remember that you probably won’t be joining Daniel Ek (the Spotify CEO) on the Rich List anytime soon and that his salary surely must be paid by the venture capitalist investment in his company and not by revenues.  Sure there’s some correlation between those two, and no there’s nothing wrong with raising venture money if they send in the clowns once again. But a $180 million rights payment implies a $77 million share for Spotify, and that’s not enough to get you on the Rich List based on cash.  Or at least cash from advertising and subscriptions–which makes one wonder if there’s some other source of revenue that’s not being reported.  But then Spotify CEO Daniel Ek said that “turnover” (roughly gross “revenues”) for Spotify in 2011 was $250 million and that in an interview translated in PaidContent, “’It is not unlikely that, already this year [April 2012], we have a turnover of more than SEK 6 billion ($887 million),’ he added.”

The point being–your music is worth a lot more than Spotify (or any other on-demand streaming service) is paying for it.  And we have Daniel Ek to thank for that realization, the person that Forbes called the most important man in the music business.  Do you think Irving agrees?  (Thus proving yet again how little the suits know and how little they care about demonstrating to the world how little they know.)

Remember–when Spotify has its liquidity event–IPO or acquisition–you will not participate in that cash.  Daniel Ek, venture investors and Spotify employees (and probably the “artist evangelists”) will participate in the company’s $1 billion valuation–that’s how you get on the Rich List.  You will not, even though the entire value of the company is based on the life’s work of artists, songwriters, producers, remixers, engineers and so on.  The way working people in the music business participate in these things is through current royalties.  If you don’t capture the value then, you never will.  (Could this be a reason for the “artists are lazy and want to be guaranteed an income forever” meme we here so often from the odd fellows who want to cut off artist royalties because creators don’t deserve it?)

So maybe the unelected Spotify “artist evangelists” should spend less time counting their stock options and more time coming up with a better way to compensate the artists they supposedly represent.

Is it fair?  As super agent Ari Emanuel said famously, “Fair is where we end up.”  Right now, I don’t think this model is fair to the artists or the indie labels.  But I don’t think we’ve ended up anywhere yet, so the whole system needs to make an adjustment closer to fair.  And that won’t happen by itself.  Given that these services, and especially Spotify, have insulated themselves from situations where they could be forced to negotiate with independent artists (and also given antitrust concerns) about the only way that I can see these deals getting more fair is if artists raise these concerns in a variety of ways and maybe the message will get through the the Spotify board room.

The Basic Math:

The first thing to realize about subscription services is that with one exception that only applies to major labels, they do not calculate royalties on a per-unit price, or in their case a per-stream price.  They pay a share of a defined set of the service’s revenues (e.g., from advertising) that is allocated by how many streams you had that month as a percentage of all the streams.

So if you had 30 tracks on the service and the service had 15,000,000 tracks that were streamed an average of 20 times each (realizing that probably 40% of these tracks are streamed fewer than 5 times, and probably 20% of the tracks are streamed hundreds of thousands of times), your share of the month’s advertising pie would be the net revenues multiplied by 30/300,000,000, divided by 30 to get to a per-stream result.  I won’t depress you further by doing the math, but you get the idea that it’s not much.  It’s just an example, it could be better and it could be worse.  This should explain why major labels are rumored to get a per stream minimum (discussed below) and why you don’t.

That is the biggest difference from iTunes financially speaking.  When iTunes tells you you sold $100 of downloads, if you know what your wholesale price is (which you would because you set it) you know how many units you sold and vice versa.  When a revenue share service like Spotify tells you you made $100 of streams, the number of streams may vary from month to month depending on the value of the advertising inventory on the service during that month.  Advertising, as you will see, is one of Spotify’s principle products–unlike a download.  One model focuses primarily on selling advertising, the other on selling music.

Because Spotify accounts on a pro-rata share of advertising revenue for indie artists, you have to make an assumption about what the revenue will be on average. For indie artists, the revenue calculation is something along these lines:

Ad-Supported Service: 50% of the gross advertising revenue less certain deductions multiplied by the label’s (or the artist’s if the artist is the label) prorata share of performances for the accounting period concerned.

Subscription Service (including mobile): the greater of (a) 50% of gross subscription revenue (less the deductions) multiplied by the label’s prorata share of performances for the accounting period concerned and (b) certain negotiated per subscriber minimum payments multiplied by the total number of subscribers and multiplied again by the label’s prorata share of performances (all for the accounting period concerned).

Rumor has it (to coin a phrase) that some labels (four soon to be three guesses) also get a third tier in the greater of formula which is a per-play minimum.  If I had to guess, I would guess that minimum is somewhere around $0.01 per play.

If the artist is signed to a label that is accounting to the artist for the Spotify income, then the artist share will probably be somewhere between 10% and 50% of the label’s share depending on the artist’s deal.

Don’t hold me to these numbers being exact, but I think it’s pretty close to what I have described.

So for the ad service alone, if Spotify grosses $100 in a month, it can take certain deductions from that $100 like sales commissions or other fees paid to advertising agents for sales of Spotify’s advertising, sales, use, value added or similar tax on Spotify’s sales of ad inventory, any fees paid to publishers or societies, and probably some other things.  Let’s say those deductions equal 50% of gross (typical ad sales commissions at 35% and publishing at 15%, both calculated on 100% of gross so you can just add the percentages), and that the taxes are zero.  (35% and 15% are kind of benchmarks for the maximum caps on these costs in rev share deals so in a good month the actual costs may be lower, but I would bet that the Spotify accounting system sets up these costs at the maximums, just like label accounting systems take a returns reserve at the maximums allowed.)  I don’t have time to do the subscription service calculations, but you would add credit card fulfillment fees to the off the top costs, which can be significant.  The point is that Spotify (like most subscription services) can deduct most of their third party non-overhead costs off the top.

Spotify then keeps 50% of that net number and shares the other 50% with the label, but allocates the label payment based on the label’s share of total performances.  (Remember, the independent artist will be the label and rumor also has it that certain labels get more than 50%.)   So when you hear Spotify’s artist evangelists say that Spotify pays out “70% to rightsholders” did you think that the revenue share was 70% and not 50%?  That would be an easy mistake to make.  A very easy mistake.

Let’s say the label has 1% of the total plays on the ad supported service that month (which is the typical Spotify accounting period).   Realize that most independent artists will have far, far less than 1% of the total plays on Spotify in a month, but let’s keep it simple.

So it looks like this:

$100 – $50 out of pocket costs = $50

Spotify’s 50% share: $25

Our label’s 1% prorata share of $25: $0.25 (realize that the total payment to all the labels will equal $25)

Artist’s share for the month assuming the artist counts for all of the 1% market share of the label: somewhere between $0.025 and $0.125 depending on the deal.  I can’t get to a per-stream payment because I didn’t feel like making assumptions for number of streams.  So if you want to make some assumptions go ahead and divide the label and artist share by whatever number of streams you think equals a 1% market share on the entire Spotify free service in a month.  It’s a lot.  They have 15 million tracks or so.  You should read “Why Spotify Doesn’t Make Sense for Musicians: 70,000 Listens Earns Less Than $300” about cellist Zoë Keating’s publishing her Spotify royalty statements in a public Google doc.  And as far as I can tell from the article and the statement, that $300 is the label’s share over 6 months because Zoë Keating is both the label and the artist for these streams.  A little quick math and you get to $0.0042-ish per stream before aggregator commissions.

Artist share for the month if there are 5 artists on the label: somewhere between $0.005 and $0.025

So these are very low payments whether you did the calculation in 2010 or last night.  There is an undercurrent in Spotify’s defense of its payouts that is starting to sound like a criticism of the label split with the artists.  But even if the split was the 50/50 that was established in the “Eminem case,” an extraordinarily low payment is even lower when it’s shared.  Spotify can be “shocked, shocked” that artist payments are low, but alarm is a little…well, cinematic.

I would guess that the way Spotify gets to the 70% payout to “rights holders” that was reported in Digital Music News is if they include publishers and if some labels get more than a 50% split.  (Otherwise why didn’t they say “labels”–“rights holders” is more inclusive.)

Another way to look at this is that for every $100 of gross revenue on the free service a label with a 1% market share makes $0.25.  (Or for every $1 million of gross revenue, $2,500).

The subscription service will be somewhat better depending on the negotiated per-subscriber minimums, but also remember that the conversion ratio from the free to the premium service is relatively low so “better” is relative.  Remember, Spotify has cleared over 15 million tracks, so in reality, the artist net is probably a lot smaller due to the proration.  By the way–there is nothing particularly magical about the Spotify deal compared to other subscription deals or rev share deals.  So don’t start looking for something sinister in the calculation.  The shenanigans are probably not in the rev share, it will be other places, like on what doesn’t get included in gross for example.

Rumor has it that the way Spotify (and most other subscription services) define advertising revenue is as monies received by Spotify for sales of in-stream advertising, sponsorships and promotions and display advertising, sponsorships, promotions that appear on the Spotify client during playback.

I hear that subscription revenue is defined as revenue from the various subscription “tiers” from subscriber fees, access charges, perstream charges and subscription fees from the subscription service, as well as referral fees, bounties, affiliate fees and the like from sales of products and services offered by means of the subscription service.  Does this include Spotify’s “sponsored playlists”?  Not clear.

Oh, but of course it must be said that both these calculations exclude hardware that plays Spotify sold through the service.  Now call me suspicious, but whenever I see something specifically excluded from one deal, I know that it is so easy to change that “ex” to “in” and it makes me wonder what other deals might say (with you know who, perhaps).  Particularly in the absence of MFN treatment.

And then of course if you are going to Spotify through an aggregator, you have to deduct the aggregator’s commission.

Now there’s a business, eh?  I understand now why the need so much venture money to cover their burn.

This is not to knock Spotify as a service but the numbers are what they are so it’s important to keep that in perspective.  I don’t quite understand what the comparison between the Spotify subscription service and iTunes is meant to prove, and I also don’t see how Spotify could be the second highest income source for record companies.  If you take the claim that Spotify has paid $180 million to labels in 2011 on a worldwide basis and you wanted to see if Spotify was the second highest revenue source, one way to do it would be to determine how many CD sales it would take to equal $180 million.  If Spotify was second, you would expect CD sales to be less than $180 million.  (Which seems totally implausible to me, but let’s go with it for a minute.)

In order to make that calculation, you’d have to make an assumption about the blended wholesale price of CDs if you wanted to get a feel for the unit sales.  If you took a fairly high average wholesale price, say $9, that would mean that 2011 CD sales were under 20,000,000 units on a worldwide basis.  If you took a fairly low average wholesale price of say $3, that would mean that 2011 CD sales were under 60,000,000 units on a worldwide basis.  Adele alone has sold 22 million.  So I feel like there’s some missing data there somewhere.  But then I didn’t go to Harvard and I’m just not as smart as these city fellers.  $180 million is not nothing and it definitely gets you a NARM board seat, but I don’t quite follow how it makes Spotify the number 2 revenue source behind iTunes but ahead of CDs on an industry wide and global basis.  And neither does Glenn Peoples.

So what is appalling about Spotify is not that the payouts are small, not even that that they refuse to disclose the kind of detail an artist would need to know in order to determine whether using the service is a good idea–that’s nothing new, for years major label royalty statements have given artists just enough information to almost but not quite know what’s going on.

What’s appalling is that they are getting so rich off the backs of the artists, songwriters, producers, remixers, and indie labels that provide them with their sole product.

As I told the Austin Chronicle in a recent interview:

“To me, it’s a lot like the record clubs,” offers Castle, referring to the mail-order companies of last century, like Columbia House and BMG. “Record clubs were owned by the labels, and once you got put out by the record club, you became part of this giveaway program. The royalty rates for artists and songwriters went way down, and if you worked at one of those labels that had a record club, there was no way they were going to let you hold back those records because the profit was just too great.”

When I worked at A&M, I did everything I could think of to put bombs in the recording contracts that would disincentivize record clubs from putting out our records.  12 month or “reasonable” holdbacks, no reduced rate mechanical licenses, everything I could think of.  Did it stop them?  Sometimes.  But it slowed them down.

And even if the “Information is Beautiful” graph may need to be updated, what definitely hasn’t changed is that it looks like the people who are really making the money out of Spotify’s cash flow are selling the advertising.  That’s another point of disclosure that it would be nice to know.  Maybe that was announced and I missed it, but I’d love to know which adserving networks Spotify uses–and if it has an ownership interest in any of them.  And whether the $1 million each that its US launch partners reportedly paid for the privilege ended up in the pockets of any artists (Chrysler, Coke, the Daily, et al).

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