Did Spotify Break the Music Industry?
Spotify is never far from the news, whether it’s Taylor Swift withdrawing her catalogues or spats with prominent artists such as Radiohead frontman Thom Yorke, Talking Heads frontman David Byrne or veteran singer-songwriter David Crosby. Often accused of ‘breaking the music industry’, Spotify is painted as the devil that democratised music for a mere monthly pittance, stripping the industry’s creative genii of the revenues they might previously have enjoyed from CD sales. But as everyone knows, the world has changed.
In 2015, the IFPI (the International Federation of the Phonographic Industry) reported the music industry had finally surpassed its pre-Millennium high by achieving revenues of US$15 billion . It was a small rise, but the industry had emerged from the doldrums; it was the first increase in revenue for nearly two decades. Then again in 2016, the IFPI reported the industry’s second consecutive year of growth, with revenues of US$15.7 billion .
In 2017, Spotify accounted for 36% of subscribers to music streaming services worldwide, with 18% of Americans using the service. Spotify is nearly twice as large as its nearest competitor with more than 70 million paid subscribers worldwide . Its closest, Apple Music, has 40 million . There is little doubt that Spotify and other streaming services have reversed the declining fortunes of the music industry. People seem happy to pay £9.99 per month to subscribe, rather than going through the hassle (and additional expense) of buying and downloading (legally or illegally). According to research conducted by the European Commission’s Joint Research Centre in 2015, Spotify has even had a dramatic impact on music piracy , reducing the number of illegal downloads by one, for every 47 streamed plays.
Nevertheless, some artists and commentators argue the rise of Spotify has been positive for artists. Brooklyn-based singer-songwriter Vérité, writing for Forbes.com, recounts how losing a record deal with a major label forced her to look at her career from a fresh perspective . “Post-revelation, my entire mentality shifted, and the idea of being an artist morphed into being a creative entrepreneur,” she writes.
Industry commentator Denis Simms, writing for Music Business Worldwide , highlights a raft of ways in which streaming services like Spotify have changed artists’ lot for the better. Simms argues that streaming revenues have resulted in “a renaissance of once dormant music rights, suddenly infused with the value provided by the virtues of being a gradual and predictable (down to exact payment dates!) revenue stream”.
He gives the example of finance startup Sound Royalties, which in 2017 pledged to invest US$100m in artists and songwriters over the following two years without asking for rights ownership. Sound Royalties advances artists cash against future royalty earnings, which is paid back through a percentage of royalty income. Artists can use the funds to finance new creative projects.
“As the new economics of streaming mean that royalties [are] becoming increasingly viewed as a bankable asset rather than a thing of the past—thanks Daniel Ek!—we will see the balance of power continue to shift away from being firmly in labels’ hands and even more artist friendly funding options will surely emerge in the market,” he writes.
Paul Resnikoff, writing for Digital Music News , thinks that he has found another answer – Spotify should start its own label. He argues that Spotify, the company that saved the major labels, could quickly become the biggest label in the world.