While I was at the Music Biz conference in Nashville this month, I was thinking about Spotify. On the one hand, Spotify may have made some missteps recently: getting lambasted for appealing the Copyright Royalty Board’s rate increase, going after Apple for “monopolist” practices in their app store, and clashing with Warner over licensing songs in India. Maybe it was just bad timing; several conflicts emerging simultaneously that paint Spotify as fighting rights holders on several fronts at once.
Or maybe Spotify was doing what any business should do: try to make their business work.
If you had to answer to stockholders, what would happen if you did not appeal a supply rate increase controlled by judges – the government? I love both Spotify and Apple, and how much they are music fan friendly, but it is a little weird that in one realm they are competitors and in another realm one of them controls the marketplace (and, to some extent, profitability) of the other. And the India thing was likely just setting the stage for the next round of global licensing with all three Majors.
But the fallout of all three of these battles emboldened the publishing and songwriting communities to issue their own flaming arrows at Spotify. And that made me think: don’t they realize that Spotify is largely responsible for bringing the music industry revenue pie profitability back to life?!
I see Spotify as the icebreaker, the nuclear ship that created a new path when the entire music industry froze over. Everyone in America was shivering and the Scandinavians decided to go to sea. Spotify took all the blows; built not just the ship, but the market for listeners to pay for streaming. Have you ever tried to build a market? It’s fucking hard. Each step of the way, existing players in the industry fought against it—the competitors, the disrupted, the suppliers, not to mention the consumers—even though there was no better plan in place. And the big tech companies – Apple, Google, and Amazon – sat back and waited. And once the path was clear and music listeners finally said, OK, we understand streaming now. The existing tech heavyweights thought, we watched Netflix and Hulu battle it out and we can see where this is going and where there can be more than one player. And the same can happen in music.
Then Apple, with its millions of credit cards on file, was ready to get into the game. And then Amazon, with its millions of credit cards on file, was ready to get into the game. And so forth. Let me ask you this: do you want a few companies that make their money off hardware or retail sales or advertising to dominate the music market? Would it be nice to have an “independent” company that can balance out the companies that can use music as a loss leader for their core businesses?
I have no idea how much songwriters and publishers should get paid per stream or per thousand streams. The same goes for labels, though my informal polling at Music Biz reveals that even the indie labels are very happy with the streaming services. That makes me wonder is this a longer-term tension that has always existed? Publishers versus labels for percentage of revenue? Or maybe it has to do with publishers versus “manufacturers?” Did some of the burden of payment switch from labels to streaming services and is that why labels are happy and publishers are pissed? Maybe this is just the healthy tension that has to exist in negotiations. As long as the streaming model does not die in the process.
Then again, this is the moment for publishers and songwriters to fight before the value of songs gets locked in for the next 10 or 20 years. If they do not fight now, they lose the fight. They have to fight on the political front and on the business front. And lobbing bombs in the press targets both sides. So, yes, they know that Spotify carved out a new market. But this is just the beginning.
What do you think? How can this be resolved? Tweet about it with hashtag #musictectonics and let’s figure it out.
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