Spotify has done the unthinkable: made people pay for what was once free, says Ed Power
THE music business may be rising from the dead. Its rebirth is driven by the thing that nearly destroyed it, the internet.
Propelled by online streaming services, the most popular of which is Sweden’s Spotify, record company revenues rose 0.3% in 2012.
That sounds a bit trifle, but is hugely significant given that revenues nearly halved from 1999 to 2011. The patient has a pulse.
“It’s a massive relief to see even a negligible rise,” said Tim Ingham, the editor of Music Week. “It will never return to the halcyon days of the CD boom in the 1990s, but there will be an overall feeling of relief.”
Through the 2000s, illegal file- sharing devastated CD sales, which were falling 20% year on year. Here, the collapse of the physical music market reached its denouement with the shuttering in February of the largest bricks-and-mortar retailer, HMV.
The internet may save music from the abyss. Launched in October 2008 and initially regarded with suspicion by record companies, Spotify (along with rivals, such as the UK’s We7 and France’s Deezer) has emerged as a potential saviour. Spotify has achieved what was considered unthinkable: it has persuaded consumers to pay for music they might have downloaded for free.
“To get rid of piracy, it’s better to have easier services,” said We7’s Steve Purdham, when the company launched in Ireland in 2011. “Services that work better and give you better music.”
The turnaround is dramatic. Digital revenue now accounts for a whopping 34% of industry earnings. With a subscriber base of five million, Spotify is in the vanguard for the new income model and has paid $650m in royalties to labels.
The brainchild of Stockholm start-up wiz Daniel Ek, Spotify makes inventive use of the ‘fremium’ internet model. From your computer, you can stream songs from its database of millions of tunes for free, although you will be interrupted by ads. Pay €5 a month and you can listen without commercials. Pony up €10 euro and you get the ads-free subscription, plus streaming to your smartphone or tablet. You are walking around with the world’s largest record collection in your pocket.
The labels adore the Spotify concept. Yes, they would rather we were still splurging €21.99 on CDs. But now they are thrilled people are paying for music at all.
So everyone’s a winner? Not quite. Audiences enjoy Spotify’s ‘all you can eat’ model; record companies are relieved to see cash coming in. Rather less excited about cheap music are the artists, who feel they are the losers.
Singer-songwriter Mark Eitzel said he has been trying to have his music pulled from Spotify. Due to the vagaries of music licensing, he has not yet succeeded.
“It [Spotify] doesn’t do me much good. It’s not going to make me any more popular. It makes them richer, though. The day your record is released, it goes up on those sites. Think about it, how many times do you listen to a record? Twenty times, maybe? So, instead, of purchasing a record and listening to it 20 times, nowadays people just stream it 20 times.”
Other musicians are troubled by the aesthetic implications. If you can listen to whatever you want, whenever you want, how will you become a discerning consumer of art?
Jana Hunter, of band Lower Dens, said services such as Spotify devalue music. What once was creative expression is now a commodity.
“It speaks to a culture that does not know what the value of music is. We prize it as an accessory. We don’t understand how important it is. We just need to take a harder look at what we value in culture,” she said.
There is something strangely preordained about the rise of Spotify’s Daniel Ek (30). Christened the ‘most important man in music’ by Forbes, the young Swede was a millionaire by the age of 23, thanks to a series of successful start-ups. However, his fortune did not bring happiness and he started to look around for a ‘disruptive’ technology that would not only make him wealthy but also immortalise him in tech-sector annals.
Puzzled by the music industry’s helplessness in the face of out-of-control file-sharing, he had a hunch streaming was the future. With business partner, Martin Lorentzon — a relatively ancient 42 — he conceived of Spotify, the name arising when Ek misheard one of Lorentzon’s suggested titles for the business (they typed the word into Google and came back with zero hits).
Five years later, Ek heads an entertainment juggernaut, a company which, alongside Facebook, Google, Apple and Amazon, can be considered one of the most influential players in technology.
“He’s the only tech entrepreneur who’s had the patience to achieve what he has with the record business,” was start-up guru Sean Parker’s recent assessment of Ek.
“He has this Zen-like patience and an ability not to crack under pressure or get frustrated. Over and over again, he puts himself in a situation where a normal person would have thrown in the towel.”
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