The music industry is a skittish sort. From the cassette tape to the compact disc to MP3s and beyond, this industry has seen a threat in almost every innovation it has inspired. Vinyl isn’t dead, but the idea of playback restricted to a single physical medium is long gone.
In fact, Adam Williams, head of Spotify for Europe, Benelux, UK and Ireland, believes consumers have moved far beyond that. "It’s about being able to access music anywhere – it doesn’t matter where you are, you should be able to do it," he said.
Consumers are demanding frictionless music access. "They want it on whatever device they have at that particular point in time," said Williams and, by streaming music to computers, mobile devices, smart TVs and in-car systems, Spotify is certainly trying to get to that point.
Following the money
As of March 2013, Spotify claimed 24m active users worldwide, 6m of whom are paying customers of its monthly subscription service. Though packages are priced differently in various markets, take the lower-priced Unlimited service priced at €4.99 per month in Ireland and that makes a company earning roughly €30m per month from subscribers alone. Top that off with revenue from advertising and a percentage of every digital download purchased via the platform, and it adds up to a highly successful business model.
Spotify’s artist in residence DA Wallach, one half of indie pop band Chester French, has stated that about 70pc of money made by Spotify goes back to the music owners – yet other musicians are not convinced. A number of high-profile artists have come out against the music-streaming service, including Patrick Carney from rock duo The Black Keys, Radiohead and Atoms for Peace frontman Thom Yorke, and David Byrne of Talking Heads fame.
According to Williams, Spotify will, by the end of this year, give over US$1bn back in revenue. "It’s an incredible sum of money," he said. That money won’t go directly into the artist’s hands, though. It goes to the record label, which can divvy it out as it sees fit.
Another problem for artists on Spotify is discovery. Williams admits that Spotify started life as a virtual jukebox, putting the onus on the user to decide what they wanted to hear. Though it now attempts to guide users towards music they may not yet know of, this is something that rival streaming service Deezer capitalised on from the start.
“If you are a smart jukebox and only a smart jukebox, [your users] will end up listening only to what they know," said Axel Dauchez, CEO of the Paris-based company. "If that’s the case, it will generate a huge amount of revenue to the people already known, but it will totally kill creation financing," he added.
In order to build an ecosystem that allows for the creation of music, services like Deezer need to influence users and introduce them to what’s new. For this task, Deezer employs 50 curators around the world. These taste-makers make recommendations, which are then pushed out to users based on their previous listening history and other information.
This combination of selections made by real people and algorithms forms Deezer’s new ‘Hear This’ feature, a unique selling point for the platform which recently doubled its number of paid subscribers to 5m.
Fans as fellows
Of course, subscription-based streaming services are not the only online platform out there for artists. Whether it’s creation, collaboration, promotion or distribution, the web has a solution.
“[The internet is] not only a broadcast medium. It’s not read-only; it’s read-write," said Eric Wahlforss, co-founder and CTO of SoundCloud, an audio-sharing platform that has been used by musicians to communicate and collaborate with their fans.
On SoundCloud, "your biggest fans are actually co-creators," said Wahlforss. "They will re-post and re-share whatever it is you’re doing through their own creativity. That’s really where this works the best," he added.
Wahlforss believes that artists need to get involved with disruptive new technologies in order to make the most of them. "The ones who embrace this and use it to the fullest potential for their art, they’re really the ones who benefit most from this shift that’s going on, from this revolution," he said.
For SoundCloud, enabling this open creativity means staying flexible as a platform, but this doesn’t mean making it a free-for-all against rights-holders wishes. "I’m not a proponent of a completely open laissez-faire attitude," said Wahlforss." What we’re trying to do is partly move this illegal sharing over to something where the artist actually has control."
A version of this article appeared in The Sunday Times on 17 November
Streaming music concept image via Shutterstock