Why Spotify, UMG Windowing Deal Won’t Work
With yesterday's announcement that Spotify and Universal Music Group had struck a multi-year licensing deal came to revelations: 1) the music streamer would pay lower streaming rates IF it delivered specific higher revenue targets and 2) some new releases would not to available to free users for two weeks in an effort to encourage them to become paid subscribers.
As part of a new licensing deal Universal Music Group has convinced Spotify to break with its longstanding 'free for all' policy and allow windowing of some new releases to paid subscribers only. The goal is to encourage more Spotify users to subscribe, which in turn drives more revenue.
In this new deal, more revenue leads to lower per stream rates for Spotify. It sounds like I win/win for Spotify and UMG, but it won't work.
Artists and labels want hits. Total streams help determine chart position and what is a hit. Would Drake or Ed Sheeran have broken records and topped multiple charts if 50+ million Spotify free users couldn't stream their new release?
Casual fans will wait. The Spotify, UMG window for paid users is short, and casual fans will be fine with waiting 2 weeks to hear a new album. Plus, during those 14 days, the curious can always pop on YouTube or Pandora to get a taste.
Some will return to piracy. They've resisted paying for Spotify, just like wouldn't pay for downloads. Why will they change now? (Are UMG, Labels Encouraging Spotify's 50 Million Free Users To Become Pirates?)
Spotify still won't have everything. Many high profile releases will still not be immediately available to Spotify users, whether or not they pay. Apple Music is still publically committed exclusive releases and is willing to pay for them, and Tidal still has artist/owners committed to growing their business.
Yesterday's deal marks a new era of co-dependent fueled cooperation between music streamers and the recorded music industry; and Spotify may still deliver the hoped for revenue targets. But it will be because more consumer discover the joys of a 35 million track catalog, and not because of two week release windows.
MORE: Spotify and Universal Music Ink New Deal That Includes Album Windowing
From what I read, UMG will have new frontline singles from their superstar artists available right away but may use the two week window to hold back albums from superstars. Will they do that every time with superstars? That remains to be seen, but they’re not going to sacrifice a single’s streaming story or that accompanying revenue.
Casual fans will wait. Casual fans don’t care about albums regardless if they’re available right away or not. Casual fans are pretty casual about their music consumption in general, thus, they are treated casually.
I don’t think the majors are that concerned about the pirating of digital downloads anymore. I don’t think the majors are that concerned about the selling of digital downloads anymore. For recorded music today and the future are about streaming and physical product that has value to fans (vinyl, box sets, bundles of physical with merch, etc.)
For the reasons above, I disagree with the “won’t work” premise of this editorial.
I get your points Seth, but do you really think windows will drive people to subscribe?
Streaming model is a broken model. You guys talk about Spotify like it’s a successful business. It’s losing 300mm annually. The only other business I know that loses money every year and everyone thinks it’s ok is the deli in Brooklyn. They lose thousands every year but the mob considers it a cost for being able to launder money through it. Just like Spotify. It’s a major label racket that launders their money through Spotify to avoid paying artists properly. So those loses aren’t really loses, they are expenses lol.
You guys act like 80 million people won’t leave Spotify if something better comes around, which it will.
Short answer: no.
They’re doing this to be able to control how they market in the few cases where an artist has enough fans willing to pay that they can drive royalty numbers with the premium pay wall.
Will it work? Maybe, maybe not. Will it hurt the labels’ bottom lines at this point? Doubtful. Those whose main objective is all free all the time, will find a way to get music for free. Windowing or not windowing makes no difference to those folks. Most of them will never pay no matter what.
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