Distributor Pulls 234 Labels From Spotify, Napster, Rdio After iTunes Payments Drop 24%

image from www.stholdings.co.ukElectronic music distributor STHoldings has pulled all its distributed labels from streaming music services Spotify, Simfy, Rdio and Napster.  "Despite these services offering promotion to many millions of music listeners we have concerns that these services cannibalize the revenues of more traditional digital services," the company said. "These concerns are confirmed in our own accounts and a recent study by NPD Group and NARM."

The NPD NARM study concluded that music streaming and other free or low cast online music services "are more likely to cause listeners to continue to stream songs, rather than buy them". To date just 4 of the 238 labels distributed by STHoldings have asked to remain on the streaming music sites. The reaction of one of their labels reaction was, “Let’s keep the music special, fuck Spotify”.

Distributor Offers Some Scary Stats

Several other indie labels and artists have left Spotify in recent weeks, but this is the most extensive exodus to date. UK based STHoldings is also the first to share hard data:

  • In the third quarter of 2011 – the first full quarter that the distributor supplied content to these services – ST’s digital revenue fell for the first time in its history, down 14%.
  • iTunes revenue in the same quarter fell 24%.
  • Spotify, Simfy, Rdio and Napster accounted for 82% of all ST tracks "consumed" in Q3 but only 2.6% of that quarters Q3 revenue.
  • Spotify paid £2,500 or $3376 USD for 750,000 streams in the quarter.

"As a distributor we have to do what is best for our labels," states the company. "The majority of which do not want their music on such services because of the poor revenues and the detrimental affect on sales. Add to that, the feeling that their music looses it’s specialness by it’s exploitation as a low value/free commodity."

via Proptone

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  1. This is really sad to see. These labels have a very short memory. When the majors fought (and ignored) the onset of digital music, Napster happened and buried them. You cannot cling to the old business models that may work for the moment, but will not withstand for the future. If you don’t welcome the future you will get left behind.
    As an independent artist myself, I understand the disparities first hand of Spotify revenue for majors and everyone else (read your Zoe Keating post http://tinyurl.com/zoespot ) and I won’t deny that incredible streaming services like Spotify reduce iTunes sales. It does. Yes I’ve seen my iTunes income fall as well, but I’m not upset about. It’s inspiring. It forces me to innovate new and creative ways to make money.
    This is how we progress and this is how the music industry grows. If you can’t see by now (or didn’t realize this 5 years ago) that this is where music is heading then you will get left behind. The distributors, labels and artists should take this opportunity to innovate new ways to make money other than iTunes sales because if that’s all they are relying on then they’re not going to survive much longer.
    People have tasted the greatness of Spotify and understand what they want with music – instant streaming in an iTunes like interface. Just because you pull your artists doesn’t mean these people will choose your old model over the new one. They will just choose artists embracing the new model over artists that embrace the old one.

  2. with numbers like that I can see why they are removing themselves from spotify.
    Its true that new models can work and can innovate and improve, but when the current model is working, why kill it? Not that it shouldn’t be improved upon and when it starts failing, you switch to the new model and not beat a dead horse.
    But at this point if iTunes music is selling and providing much higher revenues, its obviously working better for now.
    I do love spotify myself, but when it comes to music I love, I like to pay for it and give the musician a fair cut.

  3. 234 labels generating 750,000 streams? Take this in mind and think again. How big is this?
    Comparing the number of streams with the number of sales is like conmparing illegal downloads with sales. Apples – oranges

  4. No one chooses the artists they listen to based on how they do business or what channels of distribution they favor. It is ridiculous to think that people will favor one artist or another based on whether or not they embrace the new model. The popularity of a countless number of artists has survived decades of new ideas of how music should be distributed. Music transcends business strategy and its survival is not dependent one digital music service over another.

  5. I was with the article until “looses” – seriously this is the umpteenth time for that grammatical error on this site. Also “it’s” is used incorrectly in the same quote. I hope this is verbatim and feel free to use (sic) in the future when quoting grammar monstrosities like this.

  6. All I can say is that 234 labels is a pretty big number. Think about it… if you were to sit down and get an explanation out of ever single one of them (which is in favor of not partnering with Spotify) then you’d be pretty overwhelmed and that number would seem a lot greater. I don’t think it’s an issue of whether or not these labels are thinking about the future… they are thinking about the present. At the moment, they can make more money for their artists by NOT being on certain streaming services. I’m sure they realize that as the years roll by more and more music will go the route of streaming, but in business there is absolutely no reason to give up sales that can still be made. Remember, most of the time we resist change until we’re FORCED to embrace it. If these companies can still make money for their artists then they should stick to that!
    Free album download at http://www.facebook.com/chancius

  7. Replying to everyone:
    @Chancius – It’s very short-sighted to say do what makes the most money right now. If Steve Jobs had that mentality and business model there would be no iTunes, iPod, iPad, iPhone. You have to innovate and not only concentrate on this year’s bottom line.
    By removing their artists from Spotify they are missing out on thousands of potential fans. That’s how you GROW your business not just sustain it. Keep your artists on Spotify and accept that iTunes sales will drop. Get your artists on tour and watch the attendance grow. OR take your artists off of Spotify, watch their fan base decrease and in 5 years when there are ONLY streaming services (when pay for download is dead) and you didn’t hop on board with streaming when you knew you should have (now), then your labels will die and your artists will have to start over.
    Fighting progress is never the correct business model.
    @Spiritmath Why do you think Pandora caught on so rapidly and is one of the premier (if not THE premier) streaming service? Fans don’t want to work to find new music. Of course your average fan doesn’t think “I don’t want to support XYZ band because they embrace an old model.” Fans don’t care about music business. BUT if an average fan is searching for music on Spotify or wants to check out a band they’d been hearing about and that band isn’t on Spotify, then that fan will move on. They won’t go hunting through the web to find a way to preview the music. They don’t want to pay $10 to download an album when they may not like it.
    This is the reason Myspace flourished for music before. It was a one-stop shop to preview music.
    Not to mention the social benefits of having your band on Spotify with Facebook integration. It’s how music caught on with Myspace – people would share those band’s songs on their profile and their friends would check them out. It’s what is now FINALLY happening with Facebook integration. It is now how friends share music.
    I give it 1 year until virtually everyone is on Spotify and those labels come crawling back, tail between their legs.

  8. LOL in 1 year they’ll all be back….You need to registers for the free NeilsonSoundscan webinar tomorrow so you can get some facts to go with that can of beans you’re holding onto. BTW I have been online since early 90’s and I have heard the like of you say physical will be dead by 1999, 2002, 2005, 2007 2009. blah bla blah.
    The fan which is all that matter has never asked to get music in one way. So those that offer them, the fans, music digitally and physically will do well for many years to come.

  9. @Nelson very confused what your point is. Please read both of my previous comments. I believe we’re on the same team here. I never said to dismantle any form of music. On the contrary, I said artists shouldn’t ignore streaming music services like Spotify to help their bottom line. Of course I didn’t mean my “I give it…” statement to be a fact. Of course it’s a presumption.
    Again, quite confused at your point.

  10. I agree with Nelson. I think it’s speculation to champion online streaming as the future at this point. Nelson’s comment suggests the cd was supposed to be dead by now too. But it’s still here(though dwindling). I think online streaming should be apart of a new calibrated strategy to gain exposure and to sell music; but it shouldn’t be seen as the new game changer for everyone to adopt. Here is also a link showing that FM radio is still the number one medium for discovering music. It doesn’t have demographics but contains enough info to give an idea about where music is right now and how much would have to change to see the predicted Streaming era come to fruition.

  11. Only fools fight the tides of change.
    Quick stats on me:
    -I hate FM
    -I live by XM, Pandora, & occasionally YouTube
    -I’ve maybe spent $50 in my life on iTunes
    -I went to more concerts than ever this summer, some of people discovered through the services above
    -I’m in my 20’s, & most of my friends are just like me

  12. This is all about price. Spotify should be for consumers that are willing to pay an extreme premium. Spotify’s technology is great and should be embraced but ONLY if the service is priced properly in relation to existing revenue streams.
    Once again, the powers that be that cut deals with Spotify allowed themselves to be whored as a loss leaders to popularize third party technology. It should be the other way around or prohibit access to the content period.

  13. Ari, If we were to take everything Bob Lefsetz said as gospel I’d be terrified for the future of music. Bob is nice enough, I actually appreciate some of the things he has to say, but overall he’s a dinosaur, and completely out of touch in regards to how what’s happening now will effect the music landscape overall.
    He’s a fatalist in the worst way, and when not pining about the way things used to be, he’s telling you about his lovely skiing trips.
    In short, he’s not someone riding the trains, and pounding the pavement in realtime, he’s a armchair warrior, and in turn will never really see or appreciate the road we’re going down.
    As you are an independent artist, please explain to me how you plan on having a sustainable revenue stream.
    -You can’t tour forever nonstop.
    -Publishing is only an solution for some, and is hit or miss at best.
    -Brand association/sponsors only want a piece of you if you’re already in motion, have an established brand they want to appropriate/align with..and again, this isn’t something that will last forever (and will only work if you yourself don’t mind associating your work with them).
    -Merch is great, but also involves overhead which many artists can’t generate without revenue from another durable good.
    What people tasted with Spotify is something for nothing, which in most cases was brokered by labels that don’t have their artist’s in mind. As far as what happened 5 years ago, you can’t compare a format change to devaluing of the content. As the reality of Decommodification becomes apparent, the entire bottom will drop out and potentially radiate out and into other aspects of music. The revenue from a durable good was/is a key part of the music ecosystem, and the evolution of an artist like yourself.
    Just because the customer is always right, doesn’t mean they always get what they want.

  14. We are a music distributor based in the UK. Very similar in size to STH, but we have had a very different experience of streaming
    Full Blog entry link below.
    Our current Spotify quarterly turnover is, BY A VERY LARGE FACTOR more than the £2,500 quoted as ST’s quarterly Spotify revenue.
    Now, I am pretty sure that our overall company turnover is no greater than ST’s, so why this enormous disparity?
    I suspect the key here is that we have been supplying Spotify since the service opened. We (and our labels) have seen turnover grow exponentially over the past three years.
    Streaming services are very “long tail”. It takes time for consumers to discover your music, add it to playlists, favourite it, and share it with friends. The longer a label is on a streaming platform, the more established they become, and the more time users will have had to discover their music. Users need to dig deep and it also helps if labels market their playlists. If a label is sceptical about streaming and is concerned about cannibalisation, they are not going to actively promote their music on streaming services, so stream rates remain flat. Catch 22.
    Currently, Spotify is our number two digital account in most of the territories where it exists in terms of actual turnover. In Scandinavian countries it is our number one source of income (physical or digital). This morning,

  15. The problem isn’t Spotify per se. The problem is that the prospective “customers” of the music being produced today don’t perceive any value in the music. They’re not hearing anything that’s worthy of purchase,especially in these turbulent economic time. Quality music will sell. The majors just aren’t making any.Adele is having any problem moving units. Maybe someone in charge should take notice.

  16. I agree that Adele is an exceptional musician, and this warrants attention and for many people, purchase. However, you can’t compare her success, to the whole of the music making community.
    Adele is in the 1% of artists that not only have incredible talent, but have the major label backing to push her into every market worldwide. Millions of dollars in PR and Marketing make her talent prevalent and unavoidable, and therefore more likely to be heard and purchased.
    Even if an artist was as talented as adele, without the massive industry push it’s not very likely you’ll even know about them, and this is just not a reality for most people.
    That said, we’re really back to a question of scale. For all the units that adele sold, there are probably more if not 10 times as many pirated downloads, or streams. The difference is that her massive exposure across demographics boosts sales as well.

  17. They are naive to think that by pulling their content that these users will go buy it. The reverse will happen. These users will go to a torrent site and obtain it illegally. Period, point blank, the end.

  18. Not actually true. Those that had no intention of buying it would get it from torrent anyway because
    a) they won’t pay for ad free Spotify, and
    b) it’s their modus operandi
    Those that may have bought it because they are fans of the band now may not because they have access to it for free, or the £60 or £120 a year they pay Spotify. In their minds they ARE paying for it, and they are, it’s just the per stream payment is so low that the band are benefitting.
    I would guess that for small bands Spotify isn’t the ‘marketing too of discovery’ everyone likes to say it is and that people who discover the band via other means and see they aren’t on spotify will at least consider buying the band’s music if it is reasonably prices, ie: £5 for an album.
    I would add Period, point blank, the end here but it would make me look like a wally for being so presumptuous and partisan.

  19. That’s a good point. If Spotify was £50 a month it would make people consider, hmmm, I could own 5 CDs this month forever (or 10 if I shop around) or have access to the world’s music in a disposable manner.
    Problem is, though that is a fairer pricing system for bands it would slaughter Spotify in terms of users taking it up and all they really care about is bums on seats and marketing blah blah.
    Personally, and we are tiny so it is irrelevant in the grand scheme of things, but we aren’t putting our bands on Spotify. The benefit is minimal (and I mean minimal) and the cost is a reduction in sales.

  20. Not everyone is like you though, Ben. It seems to me that half the people I know are like you (xm pandora, etc.), while the other half prefer to listen to what they want (certain artists or albums) instead of random tracks. I think the emerging artists will have to embrace many of these models and discard what doesn’t work for them. I listen to pandora occasionally, but I prefer to listen to an album of songs from one artist at a time, that is what makes Spotify so interesting for the consumer. There are still a lot of people who what to own music though. Just my two cents.

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