Spotify In The USA: One Year Later

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: ,  
Comments (36)
  1. Hidden due to low comment rating. Click here to see

    • but with rhapsody you could only listen to like 30 songs a month for free. Spotify has no such restrictions, just ads. Plus spotify works better, imo.

      • sites like Seeqpod (which was bought out by Microsoft) and GrooveShark fall under the same category, but they gathered from blogs and uploaded content – GS is still around, but ad based and slower – I’ll use Spotify in lieu of sampling on Amazon now, but for nothing else.

  2. True only difference was it was $14.99/month for unlimited. Pretty much the same selection though. I had both for a short while but I noticed if it wasn’t available on Rhapsody it wasn’t available on Spotify either.

  3. Spotify works so great with iPhones, its the best app ever made in my opinion

  4. Thanks to spotify I now know that I have friends on facebook who listen to dubstep remixes of Maroon 5

    • Yeah there really isn’t anywhere to pointlessly dislike someone for their musical taste since the decline of the Indie Record Store; on the internet most people just stay in their own niches.

      Insert great “High Fidelity” meme that doesn’t exist.

  5. I have a love/hate relationship w/ Spotify. Not hate, but enough annoyances that it keeps my love in check. I have used it regularly since it came to the U.S. The service is built around playlists in a way but there are numerous problems when using them. The search function for playlists is really bad. More often than not you cannot find a good one, or even a suitable one, and have to turn to outside apps. The subscriber numbers often freeze for weeks, jump all over the place, or disappear altogether. Embedding them on a website has yielded inconsistent results. Spotify pays independent artists next to nothing, and that is very troublesome to many.

    These things will not bother the casual user, but are just a few things Spotify needs to address moving fwd. The pros outweigh the cons for me though. Being a music fanatic has never been easier or more enjoyable than with Spotify. The sheer amount of music and the ease of navigation make it a winner. I visited Rhapsody recently, and it felt like playing with a snail after owning a pet rabbit. It’s a fun landscape to watch develop. Keep your eyes out for others, too. Dr. Dre just purchased MOG. Slacker radio does great things, and apps like Songza keep things interesting too. Not to mention the new XBox streaming system, and of course Pandora. Good luck to them all! (they will need it)

    http://www.PlaylistProfessional.com

  6. Spotify ended my years of torrent downloads. I Love it.

  7. I can’t stand the user interface on Spotify. I’ve tried out all of the different services and in my opinion, Rdio is the best one out there. I’d rather pay a few bucks a month than deal with Spotify’s interface and all of the advertisements. Hopefully Spotify ends up like Myspace… breaks some new ground, but is ultimately replaced by a superior and more popular service.

    • Completely agree. Though given the size of their user base, a couple quick fixes to Spotify might go a long way. My first would be to copy Rdio’s “Collection” feature – it was the single biggest reason I switched.

    • The terrible user interface, especially with the mobile app, and its inconsistency is what made me cancel my premium plan. I’ve read so many great things about Rdio’s apps that I’m very tempted to try them out.

  8. Huge huge fan of Spotify. I’ve paid for their iPhone service this whole year, and it’s been worth every penny. I do wish that they could get mixtapes on there, though.

  9. I was grandfathered into AT&T’s unlimited data plan. That, combined with Spotify premium, has effectively stopped all illegal downloads on my part. Spotify is incredible. People need to stop comparing the current music industry’s landscape to the booming financial days of the past. It’s never gonna get there again. It’s all about damage control at this point, and Spotify has at least done something to combat the problem.

  10. Call me old fashioned, but I still like Grooveshark.

    Both the Passion Pit album and the Purity Ring album are already on Grooveshark, FYI…

  11. I like spotify like everything else…. in moderation. I use it at work and it’s a great way to check out new artists.

  12. I was pretty much in love with Spotify from the start. Signed up for Premium after a couple of weeks and had it… until last month.

    At first, I simply focused on my love for the general service and decided to overlook the absolute crappiness of the apps. I thought, give it time, it will improve. Truth is it simply has not. And even if they’ve added some new things, it still falls flat on its face on the most basic functionality. It’s mind-boggling!

    The desktop app has become insanely slow, while the mobile app started forgetting offline playlists then not scrobbling to last.fm. Last month I decided enough was enough.

    I’m also worried about the low payout – 0.39 cents per stream. As mentioned in the article, if they could get more people to become paying customers, it would probably go up. And the most simple way to do that is to redesign the applications. As soon as they fix them, I’ll go back to my premium plan. I miss it terribly!

  13. There’s something pretty brazen and Emily White-y about this “I use Spotify so I don’t have to pirate music anymore” line of reasoning running through the article and the comments. That’s basically saying that they are going to just take the music, unless you let them have it for free with a few commercials or a small monthly flat fee – for which the label receives fractions of a penny per stream and the artist receives fractions of that fraction.

    I’m not above piracy, but that’s not totally sound reasoning. Especially when it leads to characterising labels that don’t participate as “creating a stink on the Internet and pulling catalogs” and questioning whether such an action “facilitates piracy.” Against themselves? Like ‘If you don’t let me into this movie theatre, I’m just going to sneak in anyway and then you’ll have facilitated trespass and theft.’

  14. “For 30 WONDERFUL days…”

  15. I am always amazed that more people don’t prefer Rhapsody. I’ve tried MOG, Rhapsody, and Spotify, but the one that seems to work the best for me is Rhapsody. The client for Spotify is terrible; I feel like I am back on some late 90′s application like WinAmp. The iPhone app for Rhapsody is pretty smooth, although I can see why people would not like the web-based version of Rhapsody. They could certainly use a cleaner design there, but I still much prefer it over the Spotify client.

    The main area where Spotify kills Rhapsody and MOG is the social side of things, but that’s not a deal-breaker for me because I find that most of my friends listen to music that I have no interest in ever hearing, and they have no interest in hearing what I listen to (except to laugh). “Animal Collective… hilarious!”

  16. I believe in Spotify. And I agree with Lowery. Spotify is a great program, in of itself. My experience is based on the free service’s limited features, ads, and “that girl”‘s voice every 20 min. Still, I’ve never had a better online music listening experience. And, a fraction of a penny is better than nothing, I guess.

    Being that Spotify is so good, and we ALL use it, Lowery’s comments (however flawed) are necessary. I don’t agree with everything he said, but I defend his right to say them. It’s essential for someone like him to stir up the pot every so often on this particular issue. After his broadside last week I had to stop and put things in perspective. For a guy who used to make music purchases his top use of disposable income, I’ve bought scant few downloads in the past year (and nary a cd or record). Maybe Spotify is to blame for this but I’ve gone back and looked at my favorite Spotify discoveries and headed over to iTunes to rectify this

    Which brings me to my one suggestion for Spotify. They need to add a “Buy Now” button.

    Oh, and they def need to write Dave Lowery a check, I’m sure thier subscriber base just shot up too.

  17. I’m curious about the amount of revenue that comes in from the ads. This article only mentions the revenue from paid subscriptions. I find it weird that most of the ads on Spotify are for Spotify. If they had a more complex ad system, with different ads playing for different users depending on their listening patterns, I’m sure they’d make more money from ad sales, and would therefore be able to pay more in royalties. I also don’t know really what I’m talking about.

  18. In a way, I invented Spotify.

  19. Spotify’s my baby’s daddy.

  20. Any one of my friends or family members can tell you that I’m obsessed with Spotify, and I am a premium user. It’s affected my life in so many positive ways, but the main one being that I haven’t downloaded a single record illegally since I upgraded. I used to steal anything that I couldn’t find at the record store, which is a lot of what I listen to. Not anymore. Is Spotify perfect? Of course not. But I think it really is the future, and people should be looking for ways to develop its royalty payout system. It has stopped me from pirating music and I think it can do the same for many others. $120 a year is a pittance for the amount of music I get access to and I would happily pay more for Spotify’s services.

Leave a Reply

You must be logged in to post, reply to, or rate a comment.

%s1 / %s2