Pandora’s box May Be Open For Spotify

Nearly all of us here at the office listen to music on Spotify throughout the day. A few of us are premium members, and those who aren’t, likely will be. It’s only a matter of time before we all cave so we can freely click and play all the tracks we like when listening to the radio feature. Given its popularity here in the office, we are all discussing the recent spat between Spotify and some influential musicians.

On July 14, musicians of Radiohead fame Nigel Godrich and Thom Yorke removed their collaborative side project, Atoms for Peace, from Spotify’s catalog, citing inadequate compensation for new artists. Godrich summed up his views by saying:

“The reason is that new artists get paid f– all with this model. It’s an equation that just doesn’t work… If you have a massive catalogue – a major label for example then you’re quids in. It’s money for old rope. But making new recorded music needs funding. Some records can be made in a laptop, but some need musicians and skilled technicians. These things cost money.”

Spotify, the digital music service which currently boasts 24 million active users and 6 million paid subscribers worldwide, responded by saying that they are on track to pay out nearly $1 billion to rights holders by the end of 2013 and have already paid out $500 million. Godrich responded by making the clear distinction between “rights holders” and artists. After all, it’s safe to assume that a very small percentage of that $500 million paid to “rights holders” ultimately trickled down to the actual artist. Also in its statement, Spotify claims to be “100% committed to making Spotify the most artist-friendly music service possible, and are constantly talking to artists and managers about how Spotify can help build their careers.”

This may not seem like a traditional “PR crisis” right now, as some music industry observers are already asserting. But, if left unchecked, it could be a big one for Spotify. In this case, criticism from highly influential musicians (e.g. Yorke and Goodrich) who represent a portion of Spotify’s core community (artists themselves), have effectively opened Pandora’s box on a system of inequity that some are already beginning to echo (competitive music streaming service pun unintended).

Arguably, choosing to embark on a new model for music rights, royalties and publishing in an ever-changing industry leaves Spotify’s enterprise vulnerable to criticism.  Much like the digital impact on the news and publishing world, the music industry has completely changed in all facets over the last decade. With the decline of record labels and radio, and without a universally accepted model for compensation in the internet age, newer artists are left with a meager bargaining chip: greater awareness and marketing options vs. adequate compensation for creative authorship. There is clearly no grand scheme from Spotify to take money away from artists themselves – and some, even Radiohead’s own manager – have come to Spotify’s defense as an important tool to engage fans. But the conversation has now begun, and the jury is out on whether it has potential to escalate.

So what should Spotify do? Success breeds power and the responsibility for effectively shaping the future of an entire industry. From a PR and Community Relations perspective, no major company can afford to be perceived as “the bad guy” by its core influence base. Spotify may be currently exploring ways of fairly compensating artists, but in an age where social communities rise in an instant, it remains essential to the company’s mission to not only keep artists informed as much as possible along the way but to actually involve them in a collaborative program for input and discussion. There is no “right way” to do it, but there could be a wrong one. Allowing Spotify users to directly contribute to small artists’ projects is one idea (crowdsourcing), but more needs to be done if Spotify wants to maintain its brand promise to all audiences.

All artists at some point struggled to achieve success, and it may be only a matter of time before other major pop influencers, like Jay Z or Lady Gaga, for example, side with the little guy and demand that a fair compensation structure be implemented. We all here really like Spotify…in fact, we adore it.  Like that eager little girl in those AT&T commercials, we’re addicted to its instant gratification:  “We want more, we want more!”  Most users want more music to be added to its catalog, but this won’t be possible, and users may look elsewhere, if Spotify is suddenly vilified.

Clearly communicating how Spotify intends to continue to help smaller artists will help create goodwill with the music community, a fundamental audience that will allow the company to continue to grow its catalog for listeners while maintaining a copacetic culture. But for now, some artists are only seeing the downside. As reported by The Irish Independent, “80s trio Galaxie 500 explained that, at present royalty rates, their single ‘Tugboat’ would have to receive 47,680 plays to earn them the equivalent of just one album sale.”

Clearly, something needs to change here.

Update: Since we first drafted this piece, more artists have joined Atoms For Peace in their boycott. Spotify, caught off guard by the momentum, has responded with “no comment.”  There are two sides to every story, and Spotify needs help telling theirs. What do you think the service should do?

Read more:

  • Indie Labels Would Support Spotify Boycott By Their Artists via Huffington Post Tech
  • How Spotify Became The McDonalds of the Music Industry via Flavorwire
  • Spotify vs. Musicians: 10 Things To Read to Better Understand The Debate via The Guardian

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