updated 03:50 pm EST, Tue November 22, 2011
Spotify and others deny underpaying artists
Streaming music services MOG, Rdio, and Spotify have shot back at distributors and artists leaving in a new response. MOG chief David Hyman put the blame the most directly on labels, telling Fast Company that paid revenue from subscription music was a "black hole" that he couldn't control. If a label paid an artist poorly, it was that label's responsibility to improve its internal relationship, he implied.
Rdio head Drew Larner took a similar perspective, noting that musicians often get different royalties or up-front advances.
Both MOG and Spotify have argued that the sheer volume of regular subscribers and ad hits should more than make up for any lost album sales. Many of these were younger listeners who couldn't afford to buy all the music they would want and would just be pirating copies otherwise, Spotify said. The streaming leader went on to insist that some artists get "very substantial revenues" and would get more as Spotify grew.
Hyman went so far as to accuse independent labels of not properly marketing their artists. Since major labels like Sony or Universal get the same agreements, it was likely just low plays, he claimed. "Maybe [it's] because nobody is listening to their music?" the MOG head asked.
He believed that an average iTunes shopper also only bought about $40 in music every year, which to him worked out to just over $3 per month. He gave a rough figure of about $6 per month in payout to labels that, in theory, was paying the artists more.
The arguments come amidst polarizing claims and evidence. Major labels and the RIAA have always publicly portrayed any pirated copy as a lost sale, regardless of the practical feasibility. Free services like Spotify, and more recently MOG and Rdio, are widely credited in Europe as safety nets that have given the labels revenue that would have been lost. Spotify is large enough in Europe to regularly compete with iTunes for the amount of music revenue.
Comments from the services nonetheless sidestep actual evidence of declines. STHoldings, whose 200 mostly electronic music labels are backing out of free and subscription services, pointed out that it lost 14 percent in absolute revenue the very first quarter it tried services like Spotify, suggesting that the revenue wasn't as much as if it had just asked listeners to buy by the song or album. As independent labels, they're also more likely to pay their artists higher royalties.
Suggestions to solve the problems have been numerous, ranging from demanding renegotiated terms with labels or even direct artist deals up to raising the price of a subscription.