Spotify In The USA: One Year Later

| July 16, 2012 - 1:02 pm

In 2011, the Internet exploded with subscription-based streaming services. Google, iTunes and Amazon all wanted a piece of that magic digital jukebox in the sky. But the game changer was Spotify. Fan or no, the Swedish upstart has transformed the way Americans listen to music –- all since July 14, 2011, the day Spotify launched in the United States.

Spotify basically congealed more than a decade’s worth of technology to create the world’s fastest, largest cloud-based music service. Where competitors like Rhapsody and Rdio failed to capture widespread global attention, Spotify succeeded in visibly changing the music industry landscape. Before Spotify, chart systems were based on album, single and download sales. Now they’re also based on streams.

But many industry folk have beef with Spotify, too. In September 2011, LA Weekly reported that three west coast metal labels –- Metal Blade, Century Media and Prosthetic –- pulled entire catalogs. In a statement, Century Media said that while the label supports new technology that brings music to fans, “Spotify in its present shape and form isn’t the way forward … it accelerates the downward spiral, which eventually will lead to artists not being able to record music the way it should be recorded.”

Family Records founder Wes Verhoeve disagrees. “Holding back from streaming services is a bad idea because you should want to be where your customers are,” he says. Verhoeve also claims that Spotify isn’t affecting his bottom line at all. While it does “almost nothing” to compensate the label or its artists in a direct sense, indirectly, Spotify is a valuable tool. “There’s so much new music out right now that if you choose to not make it available in the place that people want to listen to it, they’re just going to listen to something else. So you’re just losing and the label is seriously losing out on listeners.”

Not everyone agrees. In his now-infamous missive to NPR intern Emily White, Cracker frontman David Lowery wrote, “While something like Spotify may be the solution for how to compensate artists fairly in the future, it is not a fair system now.” But short of creating a stink on the Internet and pulling catalogs, what’s the alternative? Doesn’t withdrawing music from Spotify facilitate piracy? And just how much money are we talking about anyway?

According to Spotify’s official Artist-in-Residence-cum-spokesperson D.A. Wallach, Spotify has more than 3 million paid subscribers, and in the US each of those subscribers are paying about $120 per year. Seventy percent of that is being paid out in royalties. Artists receive a fraction of a penny for every stream. That’s awesome if you’re Carly Rae Jepsen, not so much if you’re Lowery and a whole host of independent artists trying to make a living through music.

The truth is, there isn’t a good alternative for these indie bands because America’s youth likes free shit too much. Spotify feels free. The company pays royalties on every stream –- even if users don’t. “It’s in the best interest of the music industry to work with Spotify and others to find ways to make music streaming work,” says Bruce Houghton who runs the digital music and technology blog Hypebot. “The fans have proven that they want it.”

When founder Daniel Ek launched Spotify in the US, he said he wanted to offer a product “which is better than piracy,” and in many ways he has, but because Spotify is so new here, its impact on piracy is still unclear. “The US is a really difficult market to draw conclusions about aggregate behavior,” explains Wallach, but in Sweden Spotify has “eviscerated” piracy, he says.

In order for the same thing to happen in the US, Spotify has to continue to convince users to try the service for free and then maintain a high conversion rate from the free version to a paid premium or unlimited subscription. Right now, the conversion rate is about 20 percent. As that number increases, so will Spotify’s royalties payout to rights holders.

Currently there are more than 18 million tracks on Spotify. Sure, Throbbing Gristle’s 20 Jazz Funk Greats isn’t (yet) available, but, as of this year, Bob Dylan officially is, and that’s a bit of a coup. Online communities are petitioning the Beatles be added to Spotify as well. Eventually, this will almost surely happen. Spotify has more 20 million active users worldwide, it’s faster than its competitors, it doesn’t need an open web browser to operate and its partnership with Facebook almost guarantees that it will continue to grow exponentially.

It’s hard to argue against Spotify’s influence. “Although we’ve grown tremendously, most people have still not used Spotify so we have a lot of work before us,” said Wallach. “What we really see as the opportunity here is the prospect of getting all of those people who right now pay nothing for music to start paying something again.”

Nick Thorburn of the Los Angeles-via-Montreal band Islands isn’t so sure. “I don’t see any benefit,” he says. Thorburn hasn’t felt the presence of Spotify on an awareness or financial level and he doesn’t believe the service is helping him make new fans or reach new ears. He’s also a little biased. “I hate it. I can’t use it because the green color scheme I find really annoying and I don’t have premium. I just have the free thing.” Even so, he gets why Spotify is so alluring. “Someone asked me about Yukihiro Takahashi the other day and I was like, ‘Yeah, I don’t know if I can find that record online,’ and then he asked if I had Spotify, and I realized I do have access to it! It’s just the color palette. I never use it. I forgot that Spotify even existed.”

Tags: Islands, Spotify